Mark Latham Commodity Equity Intelligence Service

Friday 27th November 2015
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    Killing Zone: Update.

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    Stockpiling, probes, coordinated cuts – Beijing to the rescue?

    On Thursday, base metals rebounded from financial crisis levels hit earlier this week on speculation of output cuts in China, hopes a new program of stockpiling by the state and a possible probe by Beijing into short-selling by Chinese hedge funds.

    In New York trade on Thursday  copper for delivery in March gained more than 2% to $2.09 per pound. On Monday the red metal hit its lowest level since March 2009, stopping just short of falling through the psychologically important $2 a pound level.

    Nickel also gained 2% climbing back above $9,000 a tonne on the LME, recovering from a 12-year low of $8,145 a tonne earlier this week while strong gains were also seen in tin, zinc and aluminum in London and Shanghai.

    I don’t see China fighting too hard to sustain an industry which is high-cost, uncompetitive and deeply polluting

    In Shanghai nickel soared as much as 7% on reports the country's nickel producers – nearly three-quarters of which are unprofitable at current prices – are set to meet to agree on long overdue production cuts according to Reuters.

    The China Nonferrous Metals Industry Association has asked for a probe into short selling of metals on the Shanghai Futures Exchange, blamed for double-digit price decline in percentage terms in November according to Bloomberg.

    Base metals producers and refiners have also pleaded with Beijing to intervene in markets and stockpile metals. A similar program in 2008–2009 at the height of the financial crisis did shore up prices, but  some analysts are skeptical about its prospects today

    David Humphreys, an author and former chief economist at miner Rio Tinto, told the FT that expectations are that "quite a lot of this capacity is likely to exit the market and play quite an important part in the whole balancing process because it is high-cost”:

    “The constraint is the employment issue, but I don’t see China fighting too hard to sustain an industry which is high-cost, uncompetitive and deeply polluting,” he said.

    Others see non-intervention by Chinese government as a positive for the market with theFinancial Review quoting traders as saying "government purchases would only postpone the output cuts needed to reduce supplies and would be bearish. A refusal could actually be bullish as it could force cutbacks."

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    China industrial profits fall for fifth straight month

    Profits earned by Chinese industrial companies fell 4.6 percent in October from a year earlier, declining for the fifth consecutive month as the world's second-largest economy slows and industries deal with overcapacity.

    Industrial profits - which cover large enterprises with annual revenue of more than 20 million yuan ($3.13 million) from their main operations - fell 2.0 percent in the first 10 months of the year compared with the same period a year earlier, the National Bureau of Statistics (NBS) said on its website Friday.

    In September, profits fell 0.1 percent from a year earlier.

    The impact of foreign exchange and lower investment income on companies' profits were less pronounced in October than in prior months, the statistics bureau said in a statement.

    Falling sales, rising costs and hits to profit in the oil, steel and coal industries all contributed to October's disappointing industrial profits, the NBS said.

    Slower stockpiling of unsold products is helping companies' bottom lines, the NBS also said.

    Analysts, however, still see problems with overcapacity.

    "Surplus inventory is the ghost which is haunting profits," economists from Minsheng Securities wrote in a note.

    "The road ahead to destocking inventory is long and slow."

    The mining industry was the laggard with profits falling 56.3 percent in the first 10 months of the year from a year earlier, the NBS data showed.
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    Forget Glencore: This Is The Real Problem

    Back in July, long before anyone was looking at Glencore (or Asia's largest commodity trader, Noble Group which we also warned last month was due for a major crash, precisely as happened overnight) which everyone is looking at now that its CDS is trading points upfront and anyone who followed our suggestion last March to go long its then super-cheap CDS can take a few years off, we had a rhetorical question:

    Judging by what happened less than two months later, it appears that we have our answer: for now at least, Glencore, which is now flailing and which Bloomberg reported moments ago is set to meet with its bond investors tomorrow (supposedly to allay their fears of an imminent insolvency), is firmly the "answer" to our rhetorical question.

    First, a quick look at Trafigura bonds reveals that the contagion from the Glencore commodity-trader collapse, which "nobody could possibly predict"two months ago and which has rapidly become the market's biggest black swan, has spread and we now have a new contender. And while Trafigura's equity is privately held, it does have publicly-traded bonds. They just cratered:

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    ... sending the yield soaring to junk-bond levels.

     As discussed below, this may just be the beginning for the company which, because it does not have publicly traded equity - but has publicly traded debt - has so far managed to slip under the radar.

    But who is Trafigura? Only the world's third largest private commodity trader after Vitol and Glencore.

    Trafigura, whose summary financials reveal that the company - with $127.6 billion in revenues in 2014 and $39 billion in assets - is absolutely massive. In fact, in terms of turnover, it is virtually the same size as Glencore.

    But the most important and relevant numbers are on neither of the pretty annual report grabs above. They are highlighted in red in the excerpt from the company's interim report: the $6.2 billion in non-current debt and $15.6 billion in current debt for a grand total of 21.9 billion in debt!

    Now, this is less than Glencore's $31 billion (the implication being that Trafigura has a solid $6 billion equity cushion although judging by the bond plunge the market is starting to seriously doubt this) but the problem is that Trafigura's EBITDA is lower. Much lower.

    According to CapIq, Trafigura had $1.8 billion in LTM EBITDA, suggesting a debt/EBITDA leverage ratio of a whopping 12x. If one wants to be generous and annualizes the company's disclosed 6-month EBITDA (for the period ended 3/31/2015) of $1.1 billion, the EBITDA grows to $2.2 billion. This lowers the debt/EBITDA for Trafigura to "only" 10x.

    Indicatively, Glencore's own debt/EBITDA, and the reason for so much conerns about the company's solvency, is about half of Trafigura's.

    At least on the surface, it appears that Trafigura, which is as reliant on the ups and down of commodity trading as Glencore, is far more levered, and exposed, to any commodity crush than the Swiss giant.

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    Electricity generation from coal and gas falls 13%

    Electricity generation by major power producers for coal and gas has fallen by 13.2% compared to the same period last year.

    That’s according to DECC’s latest report which looked at energy trends and prices from July to September year-on-year.

    It adds the consumption of coal and other solid fuels fell by 23% whilst petroleum rose by 2.7% and natural gas fell by 0.5%.

    It also found bioenergy & waste consumption rose by 16.3%, nuclear rose by 4.7% and wind and hydro increased by more than half (52%) in the same period.

    The report went on: “Energy production was 10.8% higher in 2014 than in Q2 of last due to a boost in oil and gas production.”

    The report adds total primary energy consumption for energy uses rose by 0.6%. However when adjusted to take account of weather differences between the second quarter of 2014 and the second quarter of 2015, primary energy consumption fell by 2%.

    That’s largely due to the decreased coal use in electricity generation, it states.

    The report adds final consumption rose by 2.9% compared to the second quarter of 2014.

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    Brazil judge says senator may have interfered with Petrobras probe

    Brazilian Supreme Court Justice Teori Zavascki said on Wednesday that Senator Delcidio Amaral had been accused of trying to silence former Petrobras executive Nestor Cervero in a corruption investigation and confirmed he had ordered his arrest.

    Cervero has been sentenced to 12 years in jail for paying a bribe to the speaker of Brazil's lower house of Congress, and his lawyers had been trying to negotiate a plea deal with prosecutors.

    Read more at Reuters
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    Saudi deputy crown prince says considering subsidy cuts - NYT

    Saudi Arabia may reduce energy and water subsidies for wealthy citizens, impose a value added tax (VAT) and taxes on unhealthy goods like cigarettes and sugary drinks, Deputy Crown Prince Mohammed bin Salman was quoted as saying on Wednesday.

    The world's top oil exporter has previously said it was studying increases in domestic energy prices, the introduction of VAT and the installation of nuclear and solar power.

    Low oil prices and expected deficits in coming years have spurred a new focus on reforms in the conservative Islamic kingdom with the aims of diversifying the economy away from a dependence on crude revenue.

    "The key challenges are our overdependence on oil and the way we prepare and spend our budgets," he said in an interview with the New York Times.

    The newspaper reported that he also said he would privatise and tax mines and undeveloped land, and intended to reduce domestic oil consumption by installing nuclear and solar electricity capacity, without giving further details.

    Mohammed bin Salman, who is also defence minister, heads a supercommittee on the kingdom's economy and development as well as a National Performance Centre that oversees efficiency in all government ministries.

    Under King Abdullah, who died in January, Saudi Arabia privatised big state companies, opened main sectors of the economy to private and foreign investment, joined the World Trade Organisation and reformed labour laws.

    However, economists say the government can do more to strengthen the role of Saudi nationals in the private sector economy, including via education reform, and to make the government more efficient.

    Read more at Reuters
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    Brazil Tycoon Arrested as Police Probe Development Bank Loans

    Brazil’s biggest-ever corruption probe spread to the country’s development bank Tuesday and inched closer to former President Luiz Inacio Lula da Silva, as police visited the BNDES to request information about operations involving a sugar and ethanol business whose owner was arrested.

    A spokesman for the bank said the institution is cooperating with a request from three police officials who visited its headquarters in Rio de Janeiro to request documents related to the bank’s operations with Sao Fernando Acucar e Alcool Ltda. The sugar and ethanol business is owned by Jose Carlos Bumlai, a magnate from Mato Grosso do Sul state who was arrested in Brasilia Tuesday before he could appear for a scheduled hearing in a congressional inquiry into the bank’s loans.

    In his order for preventive detention of Bumlai, judge Sergio Moro cited testimony by former Petrobras manager Eduardo Musa that Bumlai brokered the pardoning of a debt owed to Banco Schahin by the ruling party. The order also cited testimony by lobbyist Fernando Soares that Bumlai helped broker a Petroleo Brasileiro SA rig contract that was awarded to the Schahin group, and that Bumlai had said he enlisted then-President Lula, his close friend, to help secure the deal.

    Federal police said 140 police and 23 auditors worked on 25 search and seizure operations Tuesday in the latest phase of so-called Carwash, a corruption probe that led to the arrest of more than 100 people since March 2014, including top executives at state oil company Petroleo Brasileiro, CEOs of some of Brazil’s biggest construction conglomerates, and the sentencing of the ex-treasurer of the ruling worker’s party.

    The development bank’s website shows that Sao Fernando contracted two loans for a total 395 million reais ($106 million) in 2008 and 2009, for a mill in the city of Dourados. Sao Fernando Energia I Ltda contracted 102 million reais for a bioenergy plant in July 2012. BNDES said there were no irregularities in any of the Sao Fernando loans.

    Moro ordered Bumlai’s arrest on suspicion of illegally making resources available to a political party, and for using a contract of a state company to obtain undue advantages.

    “All that was aggravated by the undue use of the name of the authority of the ex-President of the Republic, who, while no longer in his position, was still one of the most powerful people in the country,” the arrest order said.

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    Largest Coal to Natural Gas Plant Conversion in US Happening In PA

    Panda Power Funds will make one of the largest coal to natural gas plant conversions in the US, capable of producing more power with less emissions.

    This project is being built by Panda Power Funds at the retired Sunbury coal-fired power plant near Shamokin Dam in Snyder County, PA. It will be a 1,124 megawatt combined cycle plant. It will use Marcellus gas and is said it will generate enough power for approximately 1 million homes. It is expected to supply large power markets including the Philadelphia and the New York metropolitan areas. It should be in operation by the first quarter of 2018.

    It is being built on a 192 acre site of the retired coal plant and should also support additional investment at the site. “The natural gas revolution has arrived in the heart of coal country,” said Todd W. Carter, president and senior partner of Panda Power Funds. “I’m proud Panda is leading the way toward clean natural gas-fueled generation. We’re ready to take what we’ve learned in Pennsylvania and apply it to other coal-fired projects across the nation.”

    It is being financed in part by Goldman Sachs, ICBC and Investec with loans totaling $710 million dollars. These loans will be combined with funds by Panda Power Funds. Siemens Financial Services will also be investing $125 million for a total of $6 billion in combined capitol to build the plant. Panda Power Funds has selected Siemens Energy Inc. and Bechtel Power Corp. to construct the plant and it’s components.

    Siemens will provide the natural gas turbines, steam turbine, generators, heat recovery steam generators, and instrumentation and controls systems. They will manufacture the turbines at their manufacturing facility in Charlotte, North Carolina. Bechtel will do the engineering, construction, installation and commissioning of the plant.
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    Putin Accuses Turkey Of "Backstabbing", Funding ISIS, Sees "Serious Consequences" To Ties

    Moments ago Putin delivered a brief statement following the downing of the Russian jet by Turkish forces during a press conference with the King of Jordan. Here are the highlights:


    Putin makes it quite clear that Turkey, a NATO state, is responsible for ISIS funding:


    And the first official diplomatic escalation:

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    India opposes deal to phase out fossil fuels by 2100 at climate summit

    India would reject a deal to combat climate change that includes a pledge for the world to wean itself off fossil fuels this century, a senior official said, underlying the difficulties countries face in agreeing how to slow global warming.

    Almost 200 nations will meet in the French capital on Nov. 30 to try and seal a deal to prevent the planet from warming more than the 2 degrees Celsius that scientists say is vital if the world is to avoid the most devastating effects of climate change.

    To keep warming in check, some countries want the Paris agreement to include a commitment to decarbonise -- to reduce and ultimately phase out the burning of fossil fuels like coal, oil and gas that is blamed for climate change -- this century.

    India, the world's third largest carbon emitter, is dependent on coal for most of its energy needs, and despite a pledge to expand solar and wind power has said its economy is too small and its people too poor to end use of the fossil fuel anytime soon.

    "It's problematic for us to make that commitment at this point in time. It's certainly a stumbling block (to a deal)," Ajay Mathur, a senior member of India's negotiating team for Paris, told Reuters in an interview this week.

    "The entire prosperity of the world has been built on cheap energy. And suddenly we are being forced into higher cost energy. That's grossly unfair," he said.

    Mathur said India, whose position at climate talks is seen by some in the West as intransigent, was committed to the 2 degrees ceiling as a long-term goal and was confident a deal would be reached.

    But he said Prime Minister Narendra Modi's government wanted an agreement that required countries like India to do more over time as they become wealthier, rather than an "ideology-driven process" committing everyone to ending carbon usage.

    India also wants to see rich nations' pledges to cut greenhouse gas emissions subjected to tougher reviews than those of developing nations, and Mathur warned against an "external penal regime that will only turn people back".

    India, whose 1.2 billion people produce far lower emissions per capita than the world average, in October committed to slow the rate of growth in its carbon output by a third over the next 15 years.

    While the pledge was welcomed by some environmentalists, others worry that India's huge population and rapid industrialisation mean heavy future use of carbon will tip the balance in the global fight against climate change.

    Read more at Reuters

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    China’s energy guzzlers Jan-Oct power use down 2.3pct on year

    Power consumption of China’s four energy-intensive industries declined 2.3% on year to 1,387.7 TWh over January-October this year, accounting for 30.3% of the nation’s total power consumption, the China Electricity Council (CEC) said on November 24.

    Of this, the ferrous metallurgy industry consumed 422.4 TWh of electricity over January-October, falling 7.8% year on year, compared to the growth of 1.7% from the previous year; while the non-ferrous metallurgy industry used 355.6 TWh of electricity, up 3.8% year on year, compared a 4.3% growth from the year prior.

    The chemical industries consumed 353.4 TWh of electricity over January-October, up 2.2% year on year, lower than a 5.1% growth a year ago; while power consumption of building materials industry dropped 6.5% year on year to 256.3 TWh, compared to a 6.9% rise in the preceding year.

    In October, the four industries consumed a total 140.8 TWh of electricity, down 3.1% year on year, accounting for 31.3% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 41.9 TWh of electricity in October, dropping 8.7% on year and up 0.48% on month; while the non-ferrous metallurgy industry used 35.8 TWh of electricity, rising 3.1% from a year ago and up 3.17% on month.

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    Indian mulls steps to protect steel and aluminium sectors – Mr Jaitley

    IndiaPTI reported that Finance Minister Arun Jaitley said on Monday that Indian government is considering proactive steps to improve the health of steel and aluminium sectors which are reeling under the impact of decline in global prices.

    He said “Several suggestions have been offered by the bankers in relation to both steel and aluminium. Some of them have been examined by the Department of Revenue.”

    He said “Department of Financial Services would be coordinating further discussions between the banks and Department of Revenue as to what other proactive policy steps are required to be taken in order to improve the health.”

    The steel sector is a major contributor to the NPA or bad loan woes of the PSBs.
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    China busts illegal money transfers of over $125 bln - People's Daily

    China started a crackdown on underground banks in April and has so far busted over 170 cases of money laundering and illegal fund transfers involving more than 800 billion yuan ($125.34 billion), official People's Daily reported on Friday.

    Illegal flows of such "grey capital" have not only impacted China's foreign exchange management system, but also seriously disturbed the country's financial and capital markets order, the Communist Party's mouthpiece said in an article published on its website.

    Although the crackdown, launched jointly by China's police, foreign exchange regulator and the People's Bank of China, has made some progress, illegal activities of China's underground banks are spreading and the situation is still grave, the article said.

    In one illegal money transfer case, the biggest discovered in China so far, about 410 billion yuan worth of Chinese money had been transferred overseas using non-resident accounts, exploiting regulatory loopholes and bypassing oversight, according to the article.

    China's central bank and foreign exchange regulator have also been moving to restrict channels by which money can legally leave the country, in order to keep the money supply stable and lower domestic interest rates to spur growth.

    If Chinese companies and individuals continue to sell yuan to buy dollars, it reduces the amount of yuan available for lending and thus puts upward pressure on rates.

    Sources told Reuters on Wednesday that China has moved to restrict trade at offshore yuan clearing banks, stepping up capital controls even as Beijing positions its currency for inclusion in the International Monetary Fund's reserve basket.

    The IMF is set to decide whether to include the yuan at the end of the month. IMF sources told Reuters that the yuan will likely be included in the basket, but at a lower ratio than originally expected thanks to a change in methodology.

    China's central bank and commercial banks bought a net 12.9 billion yuan ($2.02 billion) worth of foreign exchange in October, data showed on Sunday, stemming heavy sales in the previous three months that underlined capital outflows.

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    Researchers just made graphene 100 times more cheaply than ever before

    We all know graphene is great - it’s super strong, it’s only one atom thick, and it's flexible, light and able to conduct heat and electricity better than most other materials out there. In fact, the only reason it hasn’t already revolutionised our energy, medical, andmanufacturing industries is that it’s remained prohibitively expensive.

    But now researchers at the University of Glasgow in Scotland have found a way to produce large sheets of high-quality graphene 100 times more cheaply than previous methods.

    Currently, the most common method of making graphene is known as chemical vapour deposition, which is where gaseous reactants are turned into a film of graphene on a special surface known as the substrate.

    In the past, that substrate was always an expensive material such as platinum, nickel or titanium carbide. These materials are smooth, so they produce high-quality sheets of graphene, but they're also incredibly costly, which means it's not feasible for the graphene they make to be used in most industries.

    Recently scientists have started using copper to reduce the price, but the metal still needs to be processed so it's definitely not cheap. Instead the University of Glasgow team decided to see if they could make graphene with copper foils, which are already being cheaply made in bulk to create common household lithium-ion batteries.

    Without any processing, they found that these copper foils were smooth enough to make high-quality single-atom sheets of graphene.

    Even more impressively, during testing, the graphene sheets displayed optical electrical properties that made them better suited for use in transistors than sheets that had been produced with an expensive substrate.

    “The commercially-available copper we used in our process retails for around $1 per square metre, compared to around $115 for a similar amount of the copper currently used in graphene production,” said lead researcher Ravinda Dahiya. “This more expensive form of copper often required preparation before it can be used, adding further to the cost of the process.”

    “Our process produces high-quality graphene at low cost, taking us one step closer to creating affordable new electronic devices with a wide range of applications, from the smart cities of the future to mobile healthcare,” he added.

    The new technique will make it feasible for scientists to finally start using graphene in new innovations such as high-tech filters and materials, as well as medical devices.

    “Much of my own research is in the field of synthetic skin. Graphene could help provide an ultra-flexible, conductive surface which could provide people with prosthetics capable of providing sensation in a way that is impossible for even the most advanced prosthetics today,” said Dahiya. “It’s a very exciting discovery and we’re keen to continue our research.”

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    El Nino Record.

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    Argentina Elects Pro-Business President; Big Change Expected

    Argentina voted for deep change on Sunday, electing the center-right opposition leader Mauricio Macri to be president in a decisive end to 12 years of leftist populism, setting the stage for economic liberalization, a warming of relations with the U.S. and political reverberations across Latin America.

    The candidate of the ruling party, Daniel Scioli, conceded defeat and called Macri to congratulate him. With more than 98 percent of the ballots counted, Macri had 51.5 percent, while Scioli followed with 48.5 percent, according to the National Electoral Council.

    At Macri’s headquarters late on Sunday, cumbia music boomed, balloons were released and supporters danced and cheered for "Macri Presidente." Ernesto Sanz, a lawmaker and ally, said, "Argentina won’t be the same starting tonight."

    “A wonderful new stage begins for Argentina," Macri told his supporters in his victory speech.

    The 56-year-old mayor of Buenos Aires is a wealthy businessman and former head of one of the country’s most popular soccer teams. He has promised to lift currency controls and negotiate with hedge fund creditors to boost investor confidence amid the lowest reserves in nine years. He will also focus on cutting inflation, fixing the largest fiscal deficit in 30 years and luring back international investment dollars.

    Scioli and his supporters have warned that such policies, which they dismiss as "savage capitalism," will erode vital social welfare programs on which the poor depend and create an economy that caters to the rich. Macri will govern with a minority in both houses of Congress, although he is bolstered by the surprise capture of Buenos Aires province in last month’s election.

    He also will have the support of many of the country’s 32 million voters -- 81 percent of them took part on Sunday -- who say they are tired of the rule of President Cristina Fernandez de Kirchner which they consider often dishonest.

    "The government is constantly saying we live in paradise," said Santiago Canedo, 28, a law student who voted for Macri. "They say one thing and then do the next. I’m optimistic that things will change."

    Argentina, under Fernandez and her deceased husband Nestor Kirchner for the past dozen years, has stood shoulder-to-shoulder with other leftists in the region, including the Castro brothers in Cuba, Nicolas Maduro in Venezuela and Rafael Correa in Ecuador. Macri calls his approach the opposite of Venezuela’s "21st century socialism": "21st century development." He has threatened to have Venezuela ousted from regional bodies over its anti-democratic policies and human rights abuses.

    Fernandez, who will hand over power to Macri on Dec. 10, has used a number of levers to promote her policies, including seizing pension fund assets and the nation’s largest energy company while increasing welfare programs and battling U.S. hedge funds over defaulted debt.

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    Sinopec offers refineries bonus to export surplus diesel -sources

    China's Sinopec Corp is offering its subsidiary refineries big incentives
    to export their diesel fuel, sources said, in a rare move that reflects the top Asian refiner's deepening concerns about a growing domestic glut.

    The internal bonus scheme marks the latest step by the state-owned refiner to battle local oversupply of the industrial fuel as slowing economic growth curbs diesel use in mining, construction and transportation.

    The company has maintained relatively high production in order to feed growing domestic demand for kerosene and gasoline, thus exacerbating the diesel surplus, oil sources say. Sinopec's crude runs were up 1.4 percent in the first three quarters of 2015 compared with a year ago, according to corporate filings.

    About a half-dozen of Sinopec's refineries are being offered around 240 yuan ($37.60) for each tonne of diesel exported, under a scheme that started in September and has been extended to December, said two people familiar with the bonus plan.

    That's an additional 6 percent on top of domestic pre-tax wholesale prices, worth some $80 million over four months, according to Reuters' calculations based on estimates of Sinopec's exports.

    "Sinopec is anticipating China's robust gasoline demand growth will sustain in 2016. To produce more gasoline means more diesel output from refineries," said Gordon Kwan, head of oil and gas research with Nomura in Hong Kong.
    "Diesel demand in China will remain subdued, thus the potential for diesel exports to rise further ahead."

    The growing overseas sales from Sinopec, representing roughly 60 percent of China's diesel exports, comes as the government prepares to allow smaller, independent refineries to export refined fuel for the first time.

    Read more at Reuters

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    Norway government on spot over Statoil

    Norway waits for a response, as cost cuts, unemployment and fears for future projects take their toll

    Statoil is behaving like most major oil companies these days — delaying projects, cutting costs and reducing its workforce. But how much longer will its major stakeholder, the Norwegian government, sit idly by and allow this to carry on?

    Industry observers are waiting for the government to respond to Statoil and others cutting more than 35,000 jobs from the oil and gas sector over the past year, almost singlehandedly increasing the country’s unemployment rate by nearly 2%.

    The budget cuts even spurred wholly-owned state player Petoro to warn the Ministry of Petroleum & Energy that constrained access to capital may mean some of the country’s time-sensitive hydrocarbon resources will never be developed.

    Statoil argues that project postponements are just part of a drive to reduce costs in Norway, but the logic can be questioned.

    So far four drilling rigs on long-term charters to Statoil have been cold-stacked, earning dayrates of between 70% and 80% of the contractually agreed sums, even though the operator has several profitable drilling targets on existing fields.

    Petoro believes Statoil is stalling or scaling-down several profitable projects at fields including Snorre, Oseberg, Heidrun, Johan Sverdrup 2 and Johan Castberg.

    Energy advisor Hans Henrik Ramm argues that capital restraints should not be accepted as a valid excuse to avoid investments, as this is purely a question of priorities.

    He believes the government — which is highly dependent on petroleum revenues — will be forced to act if there is a risk that profitable, time-sensitive resources are at stake. The government, however, cannot use its 67% ownership to force Statoil to make investments that its management opposes without causing a stock market uproar and possible legal action by minority shareholders.

    Some argue the time has come to allow Petoro to act as an operator, having been established in 2001 at the same time as Statoil was listed on the Oslo and New York stock exchanges.

    Petoro, with only 68 employees, handles the state’s direct financial interest in Norwegian offshore licences and is supposed to function as a counter-weight to Statoil.

    However, this role is made all the more difficult if the government continues to give Statoil’s views on oil and gas policy more weight than Petoro’s.

    Another way for Statoil to raise cash and boost spending is by divesting stakes in producing fields, but those such as Snorre, Oseberg and Heidrun have a strong symbolic value for Norway and are extremely profitable.

    Neither the government nor Statoil may be keen to sell stakes in these fields to foreign investors, and the company would probably prefer to sacrifice a few hundred million barrels in future production. Then there is the question of Statoil’s dividend payments, with some, including Norwegian Business School professor Oystein Noreng, arguing they should not be prioritised given current circumstances.

    “But management bonuses are tied to the share price. Curiously, the major owner, the state, does not intervene,” he said.

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    Frontline says 20-30 VLCCs currently storing oil globally

    Leading operator Frontline said that less than five percent of the global fleet of supertankers is currently used for storing oil as the cost of renting the ships, known as very large crude carriers or VLCCs, is too high to make this profitable.

    Frontline Management Chief Executive Robert Hvide Macleod said that around 20-30 VLCCs, or between 3.1-4.7 percent of the global fleet of 645 ships, is now used for storage.

    The vessels now used for storage could typically store a combined 40-60 million barrels of oil.

    Oil traders who expect crude prices to rise will often buy cargoes and store them on ships, but the cost of renting the vessels has risen sharply this year thanks to rising output from leading producers.
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    Gazprom to purchase all Perenco project LNG

    Gazprom has agreed to purchase all of the LNG from the Perenco project in Cameroon. The project is owned by the Norwegian shipping company, Golar LNG, and is scheduled to begin operations in 2017.

    Gazprom Marketing & Trading (GM&T) will buy 1.2 million tpy of LNG from the facility, which Reuters claims it will try to sell to Atlantic markets and China.

    Reuters claims that Gazprom had also previously tried to purchase all available LNG from a production plant in Colombia, but this has not gone through due to project delays.
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    More floaters scrapped in one year than in previous two decades

    Offshore drillers have scrapped forty-four floating drilling rigs in a little over a year, due to a combination of persisting low oil prices, reduced drilling activity, and oversupply in the rig market.

    The numbers above were revealed this week by Seadrill, one of the largest providers of ultra-deepwater drilling rigs, who expects the challenging market situation for drillers in 2016 as well.
    In its report, Seadrill said that the 44 rigs scrapped over the past 14 months, represent more retirements than over the past 20 years combined.

    According to Seadrill, scrapping spree will most likely continue as older and less capable drilling rigs that are coming off contracts in the near term, will have a difficult time securing new work. Why? Because the older units will be priced out of the market by newer, more capable rigs.

    Drilling rigs that are 15 or 20 years old require significant capital investments to remain part of the active fleet and very few rig owners will find economic justification to keep these old assets working, Seadrill explained.

    When a rig is out of work, the owner has three option: warm stacking, cold stacking, or scrapyard.

    Warm stacking means a rig will be idle, but with crew on board, ready for quick redeployment; cold stacking is done when the owner thinks a rig will be unable to get a meaningful contract for a considerable amount of time.

    Seadrill is rooting for more cold stacking: “Significant cold stacking activity would represent a positive development in the market, effectively reducing marketed supply and helping to stabilize utilization and pricing until a more fundamental recovery is in place.”

    The driller also highlighted the fact that under the current market condition, it will be challenging to return a cold stacked rig to the market: “Cold stacked units will generally require an improvement in dayrates sufficient to overcome reactivation costs before they are reintroduced into marketed supply.“

    However, Seadrill doesn’t see much improvement in the drilling market conditions, at least in the near term, as oil companies are slashing their drilling budgets and pressing drillers to lower dayrates.

    In addition, there is an issue of the already mentioned oversupply, in a market that currently doesn’t need any more rigs.

    Currently, Seadrill says, 205 rigs are working, representing 73% marketed utilization. It is estimated that 180-200 rigs are needed in the floater fleet to maintain current decline curves. On the assumption that no new contracts are signed the market is expected to reach this level by Q1 2016.

    “After two significant year on year declines, there is some recovery in spending is expected in 2017, but forward visibility continues to be challenged and the timing and extent of the recovery remains uncertain,” the company said.

    As for the floater orderbook, the driller says, there are currently approximately 70 units on order, of which 29 are Sete new builds.

    “A significant number of these newbuild orders have been delayed or cancelled and we expect this trend to continue. Delayed or cancelled newbuilds will ultimately be added to the fleet, however until an improved market justifies taking deliveries, the vast majority will likely remain in the shipyards,” the company said.

    Seadrill expects, between now and 2018, to see an overall contraction in the floater fleet due to delivery delays and scrapping activity.

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    Gas Driller Hits a Gusher—and Sinks Its Own Stock

    EQT Corp. this summer drilled what by some measures is the biggest natural-gas gusher ever. The Pittsburgh energy company’s reward: a tumbling stock price.

    The well, in southwestern Pennsylvania’s Greene County, spewed enough gas in its first 24 hours to power every home in Pittsburgh for nearly three days. Named Scotts Run 591340 after a historic coal field that sparked a regional energy boom after World War I, the well has continued to produce at unusually high rates with no signs of fading soon.

    That would sound like good news. But in a glutted industry in which natural-gas prices are plunging as record amounts of unused gas build up in storage, it is a problem. Since EQT finished drilling the gusher in July, its shares have lost 29%, while U.S. natural-gas prices have fallen 24%.

    Scotts Run 591340 taps part of a rock formation called the Utica Shale that has only been lightly explored so far because it sits almost 3 miles below the Earth’s surface.

    Situated beneath Pennsylvania, West Virginia and Ohio, the Utica is close to gas-consuming regions of the Northeast. If it proves as productive as EQT’s well and a few nearby wells suggest, it could mean trouble for billions of dollars of wells and pipelines built in and from more established regions like north Louisiana and the Rocky Mountains.

    “Because the Utica is a big unknown, fear has overtaken the market,” said Matt Portillo, managing director at energy-focused investment bank Tudor, Pickering, Holt & Co.

    EQT said last month that it would suspend drilling projects in other parts of Pennsylvania to concentrate on the Utica, where it thinks wells have the potential to be so prolific that they could lower natural-gas prices and make competing projects uneconomical.

    “Some of our other inventory that requires higher prices to make economic returns would be deferred, possibly for many years,”David Porges, EQT’s chief executive, told investors on a conference call last month.

    The Utica is already starting to alter the U.S. natural-gas balance. The U.S. Energy Information Administration said this week that the country’s proved reserves of natural gas rose 10% in 2014 to a record of 388.8 trillion cubic feet. Ohio’s reserves nearly tripled thanks to finds in portions of the Utica Shale, a big factor in the higher total, the government agency said.

    Meanwhile, gas stockpiled in the contiguous 48 states exceeded four trillion cubic feet for the first time ever last week, as producers continue to drill new wells despite depressed prices and forecasts for a mild winter that would limit demand for the heating fuel.

    Shares of EQT rivals Range Resources Corp. and Consol EnergyInc. have slid 44% and 54%, respectively, since those companies disclosed their own prolific Utica wells in December and July.

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    Saudi Aramco to invest more in Indonesia's oil and gas sector

    Saudi Aramco is looking for further investment opportunities in Indonesia's downstream refining and petrochemicals industry, the company's CEO said on Thursday, after initiating a $5.5 billion project to upgrade the country's largest refinery.

    The Saudi Aramco CEO's comments are positive for Indonesian President Joko Widodo's efforts to attract investment after a clean-up of the country's oil and gas sector that followed a series of scandals.

    "Indonesia is an important country for Saudi Arabia, a rising global economy, we would like to be a part of the growth of Indonesia," Saudi Aramco CEO Amin H Al-Nasser said at the signing of the initial agreement to upgrade the Cilacap refinery in Indonesia's Central Java province.

    Indonesia will rejoin OPEC as its 13th member nation next month.

    The project is expected to increase the refinery's crude processing capacity to 370,000 barrels per day (bpd) from 348,000 bpd at present, and is also likely to include an agreement to import crude from Saudi Arabia, the world's top crude exporter.

    The upgrade will include a new hydro cracker unit, as well as units to increase production of paraxylene and polypropylene production, according to a Pertamina statement.

    "It's a great opportunity for growth in a global market," Nasser said. "We're hoping this is the start."

    Aramco was also expected to join a tender to develop a greenfield refinery project in East Java, Wiratmaja Puja, Indonesia's director general of oil and gas, said.

    Further details on a strategic partnership between Aramco and Indonesia's state energy company Pertamina have yet to be finalised, including how a joint venture between the two will be shared.

    Indonesia broke off talks on building two refineries with Aramco and Kuwait Petroleum in 2014 due to a disagreement over taxes and fiscal terms.

    Brent crude trading at $45 a barrel may have helped restore investor interest in Indonesia's downstream sector as Saudi Arabia and other oil companies move to secure markets.

    Saudi Arabia, OPEC's top producer, has rebuffed calls to cut output in an effort to support prices, and is instead focused on defending market share.

    Nasser said Aramco would meet its customers' demands.

    Read more at Reuters
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    Saudi counters ‘lower for longer’ oil mantra - FT

    A year on, as Opec ministers prepare to meet next week with oil languishing near $45 a barrel, senior Saudi officials have a different message. In recent weeks, in public forums and private briefings, they have emphasised the dangers of future supply shortages as the oil industry has slashed investment in new projects.

    Prices fell further than they ever anticipated, they say, remarks that for many in the oil market imply the Opec kingpin wants the year-long oil rout to come to a close.

    Saudi officials say they are not about to reverse the policy that saw them open the taps and prioritise their long-term exports over short-term financial gain. But behind closed doors they say they want prices to stabilise between $60 and $80 a barrel.

    That level, they believe, would foster oil demand but not encourage too much supply growth from alternative sources — a goldilocks scenario. Market watchers say that by focusing on the future outlook the kingdom can slowly coax the price higher without abandoning its strategy.

    “They have made their point and no one in the world has missed it,” says Nat Kern, at Washington DC-based consultancy Foreign Reports. “Prices have fallen a lot lower than they wanted to go and investment cuts are far steeper than they expected.”

    Prince Abdulaziz bin Salman al-Saud, Saudi Arabia’s deputy oil minister and son of the king, has been at the forefront of the shift in messaging. In a speech in Doha this month he warned that the investment needed to ensure future oil supplies could not be achieved “at any price”.

    “The scars from a sustained period of low oil prices can’t be easily erased,” he said.

    Demand for Opec’s crude is expected to rise next year as production outside the cartel falls — a key pillar of the strategy. But Saudi officials are keen to temper the industry’s response to the price crash after more than $200bn in energy investments have been scrapped.

    Mr Naimi said last week that the world will need $700bn in investment over the next decade to meet growing oil demand, which it estimates will increase by at least 1m barrels a day each year.

    In many ways, Saudi Arabia is now being forced to present a counter narrative to the oil industry’s new mantra of “lower for longer” prices — that has taken hold as a result of Riyadh’s own policy and is being pushed by influential banks such as Goldman Sachs.

    “The Saudis want to warn the market not to overdo it,” says Amrita Sen at consultancy Energy Aspects in London.

    The kingdom is also showing signs of easing off. After raising production to a record 10.6m barrels a day in June — almost 1m b/d above the 2014 average — output was cut to 10.3m b/d by October, the latest data from Opec show.

    While the reduction is partly driven by falling domestic demand, some question why the kingdom has not ramped up output further if winning customers is its main priority.

    The kingdom is vying with Russia to be the top oil supplier to China and must prepare for the return of higher Iranian oil exports next year if sanctions are lifted. It already faces increased competition in India and Europe from record Iraqi exports, while the US could become a growing market again as shale production tails off. Saudi oil exports to the US have dropped 29 per cent in three years.

    “It’s unclear to me why they would hold any barrel that they could produce back,” says Bob McNally, a former White House adviser and consultant at Rapidan Group.

    One explanation is that Saudi officials are concerned that the world’s cushion of spare production capacity — that they largely maintain — has shrunk to about 2 per cent of world demand. They also question if the US shale industry can replicate the kingdom’s so-called “swing producer” role.

    Saudi Arabia may also have good reason to talk up the price. An oil price averaging almost half the level enjoyed for the first four years of this decade has put pressure on domestic finances.

    The kingdom has drawn on its foreign exchange reserves and plans to tap international debt markets to maintain social spending and meet higher defence costs as its war in Yemen drags on.

    It also has to placate Opec peers, especially economically weaker members like Venezuela and Ecuador, which were struggling to balance their budgets even when oil was above $100 a barrel.

    “They don’t want to see oil below $40 [when Opec meets] on December 4,” says Ole Hansen at Saxo Bank, adding that he believes the kingdom is trying to make a “verbal intervention” in the market, as it has done in the past.

    “This is all really about buying time,” he adds. “Demand growth will eventually start to work off the glut, but there’s no point going bankrupt in the meantime.”

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    B.C. natural gas drilling suffers decline: report

    As of mid November, drillers had punched 462 natural gas wells in the ground in B.C., down 32 per cent from the end of November a year ago, according to the B.C. Oil & Gas Commission.

    Natural gas drilling activity has dropped off sharply in British Columbia’s northeast this year and 2016 doesn’t promise to be any better, according to a new report by the Canadian Association of Oilwell Drilling Contractors.

    The situation will continue as long as North America’s energy markets remain depressed and producers wait out decisions on whether or not liquefied natural gas export proposals will proceed.

    As of mid November, drillers had punched 462 wells in the ground in B.C., which isn’t the worst result in the last five years, but is down 32 per cent from the end of November a year ago, according to the B.C. Oil & Gas Commission.

    And the CAODC doesn’t see conditions changing much for 2016, said John Bayko, the association’s vice-president of communications.

    “By all indications, B.C. is trending downward just like the rest of Western Canada,” Boyko said. “I think we’ve seen a (big) decrease in operating days year-to-date in B.C. and we don’t anticipate that being any different moving into 2016.”

    The association doesn’t have a specific forecast for B.C., but predicts across Western Canada contractors will drill 4,728 wells in 2016. Without complete figures for 2015 yet, the organization cast the figure as a 58-per-cent decline from 11,226 wells in 2014.

    “The key (drivers), obviously, are commodity prices, and those have been down for quite some time,” Bayko said.

    For B.C., natural gas prices have wavered up and down at depressed levels that have made profitability a difficult proposition for many companies.

    Natural gas prices dipped again Wednesday as long-term weather forecasts in the eastern U.S. continue to call for temperatures well above seasonal norms, which has led American stores of the fuel to grow to a four-year seasonal high, according to the U.S. Energy Information Administration.

    Read more:

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    Glencore Says Disputed Libyan Oil Deal Has Global Support

    Glencore Plc oil chief Alex Beard defended the company’s crude-export contract with Libya’s National Oil Corp. in the west of the divided country after the competing administration in the east threatened to block its tankers.

    “International oil companies and the international community fully support NOC’s position,” Beard said in a statement, confirming for the first time the September deal with the Islamist-backed government to ship oil from the Marsa al-Hariga port. “They have made it very clear there is no alternative to the NOC at its legal address in Tripoli as the only recognized marketer of Libyan oil.”

    The comments follow claims earlier this week from the competing NOC arm in the internationally recognized government in eastern Libya that it will try to stop any tanker operating for Glencore from loading oil at the nation’s ports. The NOC in eastern Libya in the east had sent a letter to Glencore seeking to confirm whether an accord had been signed with the administration based in Tripoli.

    Mustafa Sanalla, chairman of the oil operator in the western region, said it’s legally entitled to sign a contract with the Swiss commodities trader.

    “The NOC, at its legal address in Tripoli, remains the only legally empowered oil contracting authority of the Libyan state,” Sanalla said in the joint statement distributed by Glencore. “It remains the seat of contracts for all the production, transportation and sale of Libyan oil. The Board of NOC is committed to protecting the integrity and viability of the NOC.”
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    Norway's World Wide Supply says unable to make debt interest payment

    Norwegian offshore supply vessel owner World Wide Supply will not be able to make a scheduled interest payment on its debt on Nov. 27, the shipping firm said on Thursday.

    Companies serving the oil industry are suffering from weak demand as oil companies cut back on investments and exploration to preserve cash following the fall in oil prices.

    World Wide Supply said in its third-quarter report that it had bond debts of $146.7 million at the end of that quarter and has previously said it was in talks with its lenders regarding possible actions.

    The firm, which does not have listed shares, did not specify the size of the missed interest payment.

    Four of the company's six vessels are currently out of work, giving it an average fleet utilisation of just 32.3 percent in October, it said earlier this month.

    Two of its vessels have been laid up in Norway since early September, while two have been out of work since Brazilian oil firm Petrobras terminated contracts around the same time.

    The two remaining vessels are still on contract with Petrobras.

    Read more at Reuters

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    NWE Diesel cargoes revert to discounts on weak demand, ample sopply

    Northwest European diesel is facing increased pressure from lagging demand combined with abundant resupply levels this week. The CIF NWE cargo differential to front-month ICE low sulfur gasoil futures reverted to discounted territory Tuesday, falling to minus 25 cents/mt after having traded at a premium since October 19.

    After weeks of high freight rates and constrained logistics in the barge market, diesel traders have welcomed a much-expected rise in Rhine water levels this week with the hope that improving logistics might help clear some of the overhang in the Amsterdam-Rotterdam-Antwerp hub.

    However, against all expectations, a stronger pull from inland markets has yet to be seen, market sources said.

    "There was a wide anticipation that, when the Rhine normalized, we would see a dislocation of product and 1.5 million mt should shoot up the Rhine but we've seen no reaction," one source said.

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    EXCO Resources to cut capex 59 percent next year

    Dallas oil producer EXCO Resources on Wednesday provided a small glimpse into what cash-strapped U.S. drillers might spend on oil exploration next year, announcing plans to cut its investment budget 59 percent in the first half of 2016.

    EXCO said plans to develop its oil assets “selectively” next year as it uses a more disciplined approach to allocating funds in the oil patch, focusing its efforts in the Haynesville Shale in northern Louisiana and in East Texas. It expects to spend $70 million to drill 18 wells through August, down from its $171 million budget in the same period this year.

    The company said it won’t spend any of its capital on its assets in South Texas or in the Appalachia region, but said it is aiming to get 20 to 35 percent rates of returns from North Louisiana and East Texas.

    Barclays expects North American oil and gas exploration and production spending to come down by $18.9 billion next year, following up on $68.2 billion in capital budget cuts this year.

    EXCO lost $354.5 million in the third quarter largely because it wrote down the value of its oil and gas properties, and its revenues were nearly split in half to $83.5 million from the same time last year. The company’s shares dropped nearly 10 percent, or 13 cents, to $1.21 a share on the New York Stock Exchange.

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    Glencore Wades Into Libyan Oil Fight

    The battle for control of Libya’s oil production continues, and the latest wrinkle includes a deal with Swiss mining giant Glencore.

    Glencore secured a deal with Libya’s National Oil Company to buy half of the country’s oil output. Thea deal could allow Libya to find stable buyers for its crude oil, but it could also exacerbate internal conflict within Libya.

    Libya has been in tatters for several years as a civil war divides the country and leaves most governing institutions crippled. Oil production has collapsed from a Qaddafi-era total of 1.6 million barrels per day (mb/d) down to around just 400,000 barrels per day, according to the latest estimates.

    Thus, the deal between the NOC and Glencore is a potentially significant one for the Tripoli government. Glencore will take Libya’s oil and find buyers. The oil will be exported through the eastern Hariga port, which currently exports around 140,000 barrels per day.

    Predictably, the deal with Glencore has raised the ire of the eastern government, which has promised to make efforts to block any Glencore tankers from taking oil from Hariga if they move forward with the deal. The government sent a letter to the Swiss company seeking confirmation on whether or not it had reached a deal with Tripoli, according to Bloomberg.

    The ongoing conflict between the two government factions could prevent substantial increases in oil exports. Indeed, the Glencore deal threatens to escalate tensions.

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    Iran Sweetens Terms for Oil Investors Ahead of End of Sanctions

    Iran will pitch more than 50 oil and natural gas projects to foreign investors at a two-day conference in Tehran starting Saturday as the Persian Gulf country prepares for the end of sanctions that have stifled development and production of its energy wealth.  

    The government hopes international companies will commit at least $100 billion that Iran says it needs to boost oil-production capacity by more than 1 million barrels a day. Oil Minister Bijan Namdar Zanganeh will introduce at the same event a new type of investor contract offering better incentives than the buy-back agreements Iran offered in the past.

    Iran will offer a framework for new oil deals to be negotiated project by project, rather than a uniform contract draft for all investors, Amir Hossein Zamaninia, deputy minister for commerce & international affairs, said in Tehran on Nov. 21.

    Here are five things to know about this turning point in efforts to revive Iran’s energy industry:

    * The new contract model gives investors a share of the oil they produce and lets them sell it on the global market, Seyed Mehdi Hosseini, chairman of the Oil Ministry’s Oil Contract Restructuring Committee, said last month in Tehran. The more they pump, the more they profit. Conversely, investors will share the burden of a decrease in production.

    Iran’s old buy-back deals paid companies a fixed fee regardless of how much oil they produced and offered them no incentive to exceed output targets. Buy-backs also paid no compensation to companies that spent more than budgeted amounts to develop a field.

    * The new contracts will be valid for 20 years, with possible extensions to 25 years. Buy-back agreements were limited to seven years, which wasn’t enough time for companies to make adequate returns on their investments, Total SA Chief Executive Patrick Pouyanne said last month in Abu Dhabi.

    * Investors will be able to negotiate directly for contracts with Iranian authorities and won’t be limited only to bidding. Iran won’t allow them to escape their contractual obligations if sanctions are ever re-imposed on Iran, Hosseini said.

    Companies that explore for oil or gas and come up empty-handed can search for fuel in nearby areas. Under buy-backs, companies had to stick to development plans they agreed to before starting work and were barred from exploring new areas.

    * International investors must team up with local partners that the Iranian government has pre-selected, and they can’t own hydrocarbon deposits. Iran hasn’t yet specified the stakes local companies should hold in joint-ventures that will be formed to develop fields.

    * Iran is preparing to start the bidding process for oil and gas rights by the next Iranian calendar year starting March 21. It plans to sign contracts with companies to develop fields within two years after that, said Hosseini of the Oil Contract Restructuring Committee.

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    Canadian Oil Sands in early-stage talks with potential bidders

    Canadian Oil Sands in early-stage talks with potential bidders

    Canadian Oil Sands, which is trying to attract a white knight after a hostile bid from Suncor Energy, needs more time to review its options as more than two dozen parties have expressed an interest in the company, according to a regulatory filing.

    An affidavit submitted to the Alberta Securities Commission by the Royal Bank of Canada, which has been retained by Canadian Oil Sands to lead a review of the company's options, said "four highly credible parties" have already signed confidentiality agreements.

    Following Suncor's hostile C$4.3 billion ($3.23 billion) offer last month, Canadian Oil Sands adopted an extended poison pill to thwart the bid. Suncor is attempting to get the pill quashed and a hearing on the matter is due to take place before the provincial securities regulator on Thursday.

    A source familiar with the matter, who spoke off the record without authorization to discuss the matter publicly, told Reuters that scores of shareholders in Canadian Oil Sands, who together own a sizable stake, have submitted letters to the Alberta Securities Commission supporting the company's request to extend the pill deadline.

    Read more at Reuters

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    Prominent Energy Law Firm Closing Down – Lack of Business

    It’s always fun to bust on lawyers–everyone’s favorite pass time, right? “How many lawyers does it take to screw in a light bulb?….” All joking aside, we love lawyers here at MDN. Well, most of them, anyway. Some of our best customers (and biggest supporters) are lawyers.

    And we love them right back–because you’re nuts if you sign ANYTHING to do with oil and gas without first running it by a qualified attorney. We’ve always said it, and we always will. You need a good lawyer.

    So it pains us to report that a prominent energy law firm is closing up shop. Burleson LLP, headquartered in Houston, opened an office in Pittsburgh six years ago. Burleson founder and managing partner, Rick Burleson, announced to the firm on Monday that not only is he shutting down the Pittsburgh office, but ALL of the firm’s offices, including HQ in Houston. Why? The slowdown in the oil and gas sector.

    You don’t lose 233,000 jobs over the course of a year in a single industry without major ramifications for other businesses involved in that industry…
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    Summary of Weekly Petroleum Data for the Week Ending November 20, 2015

     U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending November 20, 2015, 304,000 barrels per day more than the previous week’s average. Refineries operated at 92.0% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.5 million barrels per day.

    Distillate fuel production decreased slightly last week, averaging over 5.0 million barrels per day. U.S. crude oil imports averaged over 7.3 million barrels per day last week, up by 365,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.2 million barrels per day, 0.1% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 459,000 barrels per day. Distillate fuel imports averaged 130,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.0 million barrels from the previous week. At 488.2 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 2.5 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 1.0 million barrels last week and are in the upper half of the average range for this time of year. Propane/propylene inventories rose 1.7 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.1 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.5 million barrels per day, down by 1.8% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.1 million barrels per day, down by 0.2% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 2.1% from the same period last year. Jet fuel product supplied is up 4.1% compared to the same four-week period last year.


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    US oil production shows small weekly decline

                                          Last Week      Week Before  Last Year

    Domestic Production......... 9,165             9,182             9,077
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    Developers of Israel's Leviathan field sign preliminary Egypt gas deal

    Natural gas from Israel's vast Leviathan offshore gas field will be pumped to Egypt via an existing subsea pipeline for up to 15 years under a preliminary deal announced by the field's developers on Wednesday.

    Leviathan, which is expected to begin production in 2019 or 2020, will supply Egypt's Dolphinus Holdings with up to 4 billion cubic metres (bcm) of gas a year for 10 to 15 years, the companies said in a statement to the Tel Aviv Stock Exchange.

    Signing a letter of intent, the two sides agreed to negotiate terms for a final deal.

    The price of gas is similar to other contracts and is linked to the cost of Brent oil and includes a floor price, they said.

    "We've worked with Dolphinus before and we expect to reach a final agreement quickly," Yossi Abu, chief executive of Israel's Delek Drilling, told Reuters.

    Development of Leviathan, which holds an estimated 622 bcm of gas, is being led by Texas-based Noble Energy and Delek Group through its units Delek Drilling and Avner Oil and Gas.

    Shares in the Delek companies were up by 1-3 percent in afternoon trade on Wednesday.

    Dolphinus is a company that represents non-governmental, industrial and commercial consumers in Egypt.

    "The Egyptian market is thirsty for gas, both for domestic use and for their export facilities. There is a lot of room for cooperation there," Abu said.

    The gas would pass through an underwater pipeline built nearly a decade ago by East Mediterranean Gas (EMG).

    EMG oversaw an Egypt gas deal that collapsed in 2012 after months of attacks on the pipeline by militants in the country's remote Sinai Peninsula.

    The companies said the new deal, which is still subject to numerous approvals, would not affect negotiations between Leviathan's partners and Britain's BG Group on a potential supply deal to BG's liquefied natural gas plant in Iduku, Egypt.

    The two sides last year signed a preliminary supply deal for 7 bcm a year for 15 years.

    Egypt has said it still wants to import Israeli gas despite Italy's ENI discovering the large Zohr gas field off Egypt's coast in August.

    Earlier this year, Dolphinus agreed a seven-year deal to buy at least $1.2 billion of gas from Israel's Tamar field, near Leviathan.

    "Egypt is becoming a regional hub through cooperation with the Leviathan and Tamar partners, and together with Israel and Cyprus," Abu said.

    A source in Egypt's Petroleum Ministry said that companies wishing to import foreign gas must obtain state approval. It "must achieve a national interest for Egypt and must have added value for the economy", the source said.

    The state, the source added, does not mind allowing private sector companies that wish to import gas for their own use or for a range of industries to use the infrastructure and facilities owned by the state in exchange for a tariff to be agreed.

    Leviathan's $6 billion development was halted when Israel's antitrust regulator ruled that Noble and Delek's control of Israel's gas reserves constituted a monopoly, leading to a dispute with Prime Minister Benjamin Netanyahu.

    The regulator resigned and Economy Minister Aryeh Deri stepped down last month, giving Netanyahu control of the ministry. He is expected to give rapid approval to the deal to develop Leviathan.

    Energy Minister Yuval Steinitz expects Netanyahu to sign a waiver by the end of the year to bypass antitrust concerns.

    Jordan has also agreed to buy gas from Leviathan for 15 years, worth up to $15 billion, though the deal has yet to be finalised.

    Read more at Reuters
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    PetroChina in $2.4 Billion Asset Sale as Parent Target Nears

    PetroChina Co. plans to sell its stake in a pipeline company for as much as 15.5 billion yuan ($2.4 billion) as the nation’s biggest oil and gas producer seeks to meet year-end profit targets and focus on exploration amid a slump in energy prices.

    Beijing-based PetroChina’s board approved a plan to sell a 50 percent stake in Trans-Asia Gas Pipeline Co. to a unit of state-owned China Reform Holdings Corp., according to a statement to the Shanghai stock exchange on Wednesday.

    PetroChina and its parent company, China National Petroleum Corp., are seeking to complete asset sales before the end of the year to help meet government-set annual profit goals, people with knowledge of situation said earlier this week. The government is also looking to spin off oil and gas pipelines from its energy companies into independent businesses as part of a sweeping industry overhaul.

    “Raising cash from the listed company will help the state-owned company meet profit targets,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said by phone. “It also allows PetroChina to raise capital to shore up its balance sheet and refocus more on its core upstream business.”

    Efforts to meet the profit goals are complicated by China’s slowest economic growth in more than two decades and a global crude glut that has nearly halved prices over the past year. Oil is poised to spend a fourth month averaging below $50 a barrel, the longest stretch since the global financial crisis.

    Income at PetroChina and its state-owned parent China National Petroleum Corp. has dropped “dramatically” this year, Wang Dongjin, a deputy general manager at CNPC and president of PetroChina, said in a statement on CNPC’s website this month.

    The company appointed Zhao Dong as chief financial officer to replace Yu Yibo, who has resigned, and transferred 3.5 billion yuan of assets to units owned by CNPC, it said in statements to the Hong Kong stock exchange on Wednesday. PetroChina’s board also approved a merger plan of subsidiaries Kunlun Energy Co. and PetroChina Kunlun Gas Co., it said in a separate release to the Shanghai stock exchange.

    Trans-Asia Gas Pipeline builds and operates pipelines that link Central Asian countries to China’s western province of Xinjiang, according to CNPC’s website.

    The pipeline sale is the first major divestment by either company since PetroChina sold a 20 billion yuan pipeline stake to institutional investors in 2013.

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    Ophir Energy receives informal takeover interest - Bloomberg

    Oil and gas explorer Ophir Energy Plc has received "informal takeover and merger interest" from companies and investors, Bloomberg reported, citing sources.

    The company is evaluating the proposals but may decide against a deal, Bloomberg reported. 
    Ophir declined to comment.

    Read more at Reuters
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    Rosneft customer pre-payments ease debt burden

    Russia's biggest oil producer Rosneft revealed that it received pre-payments worth more than 1 trillion roubles ($15.3 billion) under its long-term supply contracts with customers, providing cash that has helped the heavily-indebted group to repay a substantial part of short-term debt.

    Rosneft, which accounts for 40 percent of Russian oil output, sells large volumes of oil and oil products to traders and companies, including BP which owns almost 20 percent in the company.

    Rosneft said adjusted free cash flow was at 177 billion roubles in the third quarter.

    "At this stage, sustainable cash flow generation ensures payment of dividends, decreasing financial leverage and financing the investment program."

    Many big oil companies have cut back on oil production and exploration spending because of the steep drop in oil prices, which have fallen to around $40 from a June 2014 peak of $115.

    Russian oil producers, already squeezed by low oil prices, have also had to cope with a big tax burden because the authorities decided not to cut taxes for the industry which, together with gas, generates half of state budget revenues.

    But Rosneft said in September it expected no big changes to its plans even with oil at around $40 a barrel.

    The state-controlled firm said its net income in the quarter to Sept. 30 fell to 113 billion roubles as the price for the Urals oil blend plunged 20 percent in dollar terms.

    Rosneft, one of the most indebted Russian companies, managed to cut its net debt by 40 percent in the third quarter due to the forward payments by its clients, it said.

    Net debt fell to $24.5 billion in the third quarter when the company repaid $7.9 billion worth of loans.

    It expects to repay $13.7 billion of loans in 2016 and a further $11.3 billion in 2017.

    Read more at Reuters
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    BG starts commercial ops from QCLNG Train 2

    LNG player BG Group informed that commercial operations began from the second train at its Queensland Curtis LNG plant in Australia.

    QGC, BG Group’s Australian subsidiary, has also assumed control of Train 2 from Bechtel Australia, which built the facility. BG now has full control of both LNG trains and associated facilities at QCLNG, BG said in a statement on Wednesday.

    By mid-2016 the integrated project is expected to reach plateau production, producing enough LNG to load around ten vessels per month combined which is equivalent to exporting around eight million tonnes per year.

    According to BG, since starting production in December 2014, 71 cargoes have been shipped from the liquefied natural gas project on Curtis Osland off Gladstone.

    The partners in Train 2 are BG (97.5%) and Tokyo Gas (2.5%), which is also a foundation customer.
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    The Sun Quotes GS on Oil

    OIL prices could tumble as low as $20 a barrel next year, it was forecast yesterday — raising the prospect of 90p a litre petrol.

    GOLDMAN SACHS believes oil could slump to its lowest level since 2002.

    The investment bank rated the chances of it hitting $20 in 2016 as 15 per cent — a scenario that would have been unthinkable only a year ago, when oil was $100 a barrel.

    Goldman research leader Michele Della Vigna said yesterday: “We think $20 is a possibility — although an unlikely one at this point in time.”

    He said triggering factors would be if “a very warm winter led to excessive build-up of diesel inventories”, and lack of oil storage space.

    He added: “It would be a shock to the system, a temporary one. We cannot find an equilibrium here at $20 a barrel.”

    If the cost did fall that low “the benefit of lower oil prices will certainly come through to the consumer”, he said.

    US crude was $42.57 a barrel yesterday and Brent Crude $45.65.

    Howard Cox, of the FairFuelUK Campaign, believes $20 a barrel would mean 90p at the pumps but it should be lower.

    In 2002, when oil was last that cheap, petrol cost 79p a litre and diesel 75p, but fuel duty has risen by around 10p since then.

    Mr Cox said: “Opportunistic profiteering is now rampant in the supply chain with pricing at retail outlets an opaque secretive process manipulated by colluding businesses to keep prices high.”

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    Rosneft Reports Third-Quarter Profit on Currency Differences

    Rosneft OJSC, Russia’s largest oil producer, reported a third-quarter profit after break-even results a year earlier because of a foreign currency gain even as oil prices fell.

    Net income attributable to shareholders reached 112 billion rubles, the Moscow-based company said in a statement on its website. It reported a foreign currency gain of 83 billion rubles as opposed to a loss of 95 billion rubles a year earlier. Revenue fell 8.4 percent to 1.27 trillion rubles.

    Russian oil and gas producers Novatek OJSC, Gazprom Neft PJSC and Bashneft PJSC have reported losses or a slump in profit this quarter after crude prices fell to about half of the previous year’s level. Sanctions limiting borrowing have also put pressure on Rosneft as it attempts to reduce debt raised for the $55 billion acquisition of TNK-BP in 2013.

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    Oil hits 2-week highs on Mideast tensions, U.S. gasoline rally

    Oil prices hit two-week highs on Tuesday, rising about 3 percent, after a spike in Middle East tensions from Turkey's downing of a Russian warplane and a rally in U.S. gasoline futures.

    Russian President Vladimir Putin called Turkey's shooting of its fighter jet a "stab in the back" that could have "serious consequences." Middle East tensions have already been heightened by Russian air raids over Syria to punish those it blamed for the downing of a Russian passenger jet over Egypt last month.

    U.S. gasoline futures jumped 6 percent on an expected rise in road travel around Thursday's Thanksgiving holiday.

    Gasoline supplies in New York Harbor, the delivery point for gasoline futures, were also tight amid lower imports and the delayed restart of the 70,000 barrels-per-day gasoline-making unit at Irving's St. John, New Brunswick refinery.

    Refining margins for gasoline rose by about $1 a barrel in both the United States and Europe.

    Brent settled up $1.29, or 2.9 percent, at $46.12 a barrel, after hitting a two-week high at $46.50.

    U.S. crude's West Texas Intermediate (WTI) futures finished the session up $1.12, or 2.7 percent, at $42.87. It hit $43.46 earlier, its highest since Nov. 11.

    Some of those gains came off in post-settlement trade after industry group American Petroleum Institute (API) reported a 2.6 million-barrel U.S. crude build for last week, double that expected by analysts in a Reuters poll.

    Traders have bet since last week that WTI will fall below the 6-1/2-year low of $37.75 set on August, and that Brent will tumble as well, as worries about a global oil glut resurfaced.

    But heightened Middle East tensions now could delay that, some analysts said.

    Crude could also see support from speculation that Saudi Arabia was keeping options open for price cooperation with other oil producers at a Dec. 4 OPEC meeting.

    "Ultimately, we still see a drop to around $37.75, but such a development is not expected until the market gets through the OPEC meeting at the end of next week and when increasingly bearish global supply balances place additional pressure on the WTI curve," said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates.

    Market intelligence firm Genscape reported a 2.2 million-barrel build last week at the Cushing, Oklahoma delivery point for U.S. crude futures.

    Analysts will look out Wednesday on whether U.S. government data matches, exceeds or falls short of the nationwide build of 2.6 million barrels reported by API.

    Read more at Reuters

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    EIA: Shale Rockets U.S. Proved O&G Reserves to New Records

    Our favorite government agency, the U.S. Energy Information Administration (EIA), yesterday released their annual report of proved oil and natural gas reserves in the United States for 2014.

    The report, titled “U.S. Crude Oil and Natural Gas Proved Reserves, 2014” shows proved reserves for natural gas rose by 34.8 trillion cubic feet (Tcf), or 10%, to a record high of 388.8 Tcf in 2014. Oil reserves rose 3.4 billion barrels, or 9%, to 39.9 billion barrels. That’s the highest oil reserves have been since 1972!

    This is the second year in a row for a new natural gas proved reserves record high, and the sixth year in a row for oil proved reserves (see last year’s report, EIA: Proved Reserves for Natgas Up 10% Last Year, Marcellus Leads). As a quick reminder, proved reserves are, according to the EIA, “those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.”

    That is, proved reserves are what’s in the ground now, can be gotten out, and we can prove it. This is a great report, full of excellent data and interesting charts and graphs…

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    ScottMadden Report: Getting Marcellus/Utica Gas to Market

    ScottMadden, Inc., a top energy consulting firm, recently released the latest edition of their twice-per-year report called The Energy Industry Update. The current report, titled “Strange Brew: Adapting to Changing Fundamentals”, offers insights into major events and emerging trends in the energy industry.

    This particular edition takes a close look at the natural gas industry–in particular how ever-increasing gas resources can find adequate infrastructure to make their way to market. We really like this report, for a couple of reasons. First, it gives you the wider context. Natural gas (and oil) doesn’t exist on its own. It is part of a complex tapestry of energy options and needs to be viewed that way.

    This report helps contextualize natural gas–helps you see the natgas puzzle piece in the larger energy puzzle. Second, we like the deep dive they do on natural gas. Not so long ago the estimates were that with shale gas in the U.S.–particularly in the Marcellus/Utica–we have a “100 year supply” of natural gas. Now? That number has risen to 140 years of supply. And it keeps growing.

    The report looks at rig counts and well productivity, pipelines that are (or will) move gas from the northeast to other markets, regulations and more. Take time to read it!…
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    Norway drilling 'slashed' in 2016

    There should be a steep drop in the number of rigs deployed for exploration of oil and gas reserves offshore Norway, national statistics show.

    Lower crude oil prices are influencing exporting and importing nations alike. For Norway's citizens, the number of jobs in the energy sector decreased by half from third quarter 2014 to third quarter 2015.

    Data gathered by Statistics Norway find total investments in oil, gas, manufacturing, mining and electricity for 2015 so far are $27.4 billion, down 9.4 percent year-on-year. For oil and gas alone, the year-on-year decline was 11.8 percent.

    Brent crude oil, the global benchmark price, is about 45 percent lower than this time last year. The decline acts as a form of economic stimulus for national economies that import most of their sources of energy, but depresses economies like Norway that depend on revenue from oil and natural gas sales.

    Economic growth has been slow for most of the year for Norway, with gross domestic product increasing by slightly less than 1 percent for the past four quarters combined.

    For October, oil field services company Baker Hughes finds the number of rigs deployed internationally are down 2.5 percent year-on-year. Rig counts serve as a barometer for the health of the upstream energy sector, the part of the industry focused on exploration and production.

    Statistics Norway said rigs serve as the "most important input factor" when considering upstream strength.

    "Due to low oil prices and operators' processes to cut rig costs, the number of active rigs on the Norwegian Shelf is expected to decrease in 2016," it said. For next year, the government body said there should be a "sharp decline" in the upstream sector.

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    PTT postpones spot LNG delivery

    PTT of Thailand reportedly delayed a tendered LNG cargo for early December due to current low consumption.

    Platts cited sources as saying that PTT bought two cargoes from separate sources through a tender that closed at the end of September.

    The first cargo was delivered on November 11 from the QCLNG facility on Curtis Island near Gladstone in Australia.

    The second LNG cargo was scheduled for delivery in the second half of November, but lower demand from the power generation sector and mild temperatures meant the cargo was deferred to December.

    Due to an ailing economy, PTT is not expected to buy any spot cargoes in December and January, while the company expects the deliveries from Qatar to reach 2 million tons of LNG by the end of 2015. These deliveries are part of a 20-year LNG supply deal signed with Qatargas in 2012.
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    China's teapot oil refineries set to export fuel for the first time -sources

    Beijing will allow independent refineries to export refined fuel next year for the first time, sources said, freeing up 20 percent of China's refining capacity for sales abroad as the government aims to cut a local glut and boost investment.

    The move will allow independent refineries, also known as "teapots" such as Dongying Yatong Petrochemical and Panjin Beifang Asphalt Fuel, to enter the lucrative international market for the first time, raising concerns about a fresh flood of excess diesel and other fuels into Asia.

    Currently only state-owned refiners, Sinopec Corp and PetroChina and some smaller state oil firms are allowed to sell abroad.

    In a rare meeting last week, attended by several provincial trade officials and teapot refinery executives, the Ministry of Commerce told the plants they can now apply for first-quarter fuel export quotas, according to three sources with direct knowledge of the matter.

    "It's an encouraging development as we will be allowed the same playing field as the big firms to export fuel," said a refinery executive who was at the meeting.

    The move will likely add further pressure to Asian oil product prices that are already sagging under the weight of excess barrels from mega Middle Eastern plants.

    China had this year also raised the dominant state refiners' export quotas for diesel, jet fuel and gasoline to thin swelling domestic inventories as refinery output outpaced demand in a cooling, manufacturing-heavy economy.

    While it's not clear how many teapots will apply for permits, traders estimated it could mean an additional 3 million-5 million tonnes (24 million-40 million barrels) of products will be sold abroad next year, in addition to the roughly 30 million tonnes assigned to the country's state-owned refiners this year.

    The combined exports of about 700,000 barrels per day (bpd) would be equivalent to nearly 7 percent of China's total oil use.

    "The message has been sent that there will be no ceiling for the amount they (the teapots) want to ship out," said one senior trader who was briefed on the meeting.

    "The curtain has been raised for the face-off between the big and small refineries."

    The government, however, will police the new system by checking if shipments actually take place and withdrawing any permits that companies don't fully use, according to a briefing document on the meeting seen by Reuters.

    Teapot exports will fall under the same category as that applied to state-oil companies' shipments, meaning they will be exempt from consumption and value-added taxes, the document also showed.

    Some sources downplayed concerns about the impact of the potential onslaught of teapot exports, as most of the smaller refineries don't have facilities such as export terminals and lack experience dealing in the global market.

    Coming after Beijing opened crude oil imports to independent refiners this year, the move towards fuel exports could pave the way for China's long-awaited crude futures contract, and eventually towards benchmark pricing for oil products, market participants say.

    Read more at Reuters

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    China's Oil giants consider pipeline, refinery sales

    PetroChina Co and its State-owned parent are planning to sell assets before the end of the year that may include stakes in pipelines and refineries as the country's biggest oil and gas producers seek to shore up their balance sheets, according to sources with knowledge of the situation.

    PetroChina and China National Petroleum Corp may announce the stake sales as early as this week, said the sources, who declined to provide details and asked not to be identified. CNPC is seeking to use proceeds from the sale to meet annual income growth targets set by the country's State asset regulators, according to the people.

    "Many investors would prefer they cash in on some assets rather than running the assets themselves," Laban Yu, head of Asia oil and gas equities at Jefferies Group LLC in Hong Kong, said by phone.

    "Investors have given almost zero valuation to PetroChina's assets such as pipelines. Any asset sales right now are good news for the company and could help its share price."

    The slump in energy prices has pushed energy companies to shed assets and cut staff to survive the downturn. PetroChina's third-quarter profit fell 81 percent to the lowest since Bloomberg started compiling the data in 2007.

    China Petroleum and Chemical Corp, the country's No 2 producer known as Sinopec, posted a 92 percent decline in profit.

    The sale would be the first major divestment by either company since PetroChina sold a 20 billion ($3.1 billion) yuan pipeline stake to institutional investors in 2013. Saudi Arabian Oil Co, the world's largest oil exporter, hired Deutsche Bank AG to advise on the potential acquisition of some marketing, retail and refining assets from CNPC that could be worth several billion dollars, Bloomberg reported in October.

    Income at both companies has dropped "dramatically" this year, adding pressure to meet growth targets, Wang Dongjin, a deputy general manager at CNPC and president of PetroChina, said in a statement posted on CNPC's website this month. CNPC will try to raise profit through an "asset-light" strategy, Wang said, without elaborating.

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    Ecopetrol 'to be placed in holding company'

    Colombia will reportedly create a holding company of state-owned businesses, including oil company Ecopetrol, in a bid to increase transparency and as a step towards membership in the Organisation for Economic Co-operation & Development, President Juan Manuel Santos said on Monday.

    As the first phase of the plan, cabinet ministers will cease to serve on the boards of Ecopetrol and electricity companies Isagen and ISA, three of 111 businesses which belong to the state, Reuters reported.

    "Eventually all state companies will enter the holding, which will separate from the finance ministry and be autonomous, so state companies can be run with more transparency and the most efficiency possible," Santos said in a speech quoted by the news wire.

    The holding company will be run by an independent board, he said.
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    Singapore Oil Borrowers Seek More Slack to Avoid Bond Defaults

    Borrowers in Singapore, so far spared from a wave of defaults in the oil services industry, are starting to ask creditors to cut them some slack.

    Three companies including Dyna-Mac Holdings Ltd., part-owned by Keppel Corp., this month are asking bond holders to alter certain debt limits or profit targets as contract delays wreck firms’ earnings. The issuers are among 28 oil services firms listed in Singapore with more than S$1.8 billion ($1.3 billion) of notes maturing next year.

    “If the oil markets remain depressed beyond 2016, you’re going to see some problems,” Joel Ng, an analyst at KGI Fraser Securities Pte in Singapore, said by phone. “Some of the oil and gas players will probably have to restructure their bonds.”

    The borrowing that helped build Singapore’s biggest export industry is looking overstretched after the price of Brent crude slumped near $40 and the island’s economy grew just 0.1 percent in the third quarter. Delivery deferrals and provisioning by yards are causing "cash flow issues," Maybank Kim Eng Securities wrote in a Nov. 20 report.

    Money is certainly tighter for the 28 listed oil services firms. The median ratio of their operational earnings to interest expense, a measure of a company’s ability to pay its debts, was 5.4 times in their latest filings, a steep drop from 12.5 times at the end of fiscal 2014, according to data compiled by Bloomberg.

    Oil services provider Dyna-Mac’s measure plunged to minus 4.4 times in the latest quarter from 27 times at the end of 2014. The company is currently asking holders of its bonds due in 2017 to, among other things, change a clause that limits its interest coverage ratio to at least three times. Dyna-Mac declined to comment for this story.

    Pacific Radiance Ltd. is also seeking to tweak a rule on its 2018 bonds that requires interest coverage above three times, compared with 4.1 times as of Sept. 30. The company’s debt to equity ratio, a key measure of leverage, jumped to 98.4 percent at the end of June from 75.7 percent at the end of December.

    “It’s a prudent approach because we wouldn’t know how long this soft market condition will last," Loo Choo Leong, group finance director, said by phone. "While we do not expect to breach the covenant, leaving it to hope is not a strategy. We have already cut costs and realigned our ops to be as competitive as possible. We have prepared ourselves for the long march ahead."

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    India oil imports from AsiaPac spike in Oct as refiners tap new routes

    India's crude oil imports from the Asia-Pacific region spiked last month as its refiners looked beyond their traditional suppliers for cheaper purchases amid a global supply glut.

    Crude imports from points east of India, mainly Malaysia and Australia, surged to 187,000 barrels per day (bpd) in October, the highest since April 2014, according to ship tracking data obtained from sources and compiled by Thomson Reuters Oil Research & Forecasts.

    That was more than double the volume imported from Asia-Pacific in September and up some 70 percent from a year ago, the data showed. The surge in shipments were a boost to Malaysia, Southeast Asia's second-biggest oil producer, and Australia, where some refineries have been shut.

    Malaysia in particular has been looking for stable outlets to bolster oil revenues and cushion the impact of falling global crude prices, reducing spot prices to attract buyers and offering grades to refiners further away such as in India.

    "Malaysia has reduced the premium (to the Brent benchmark) it charges, so these grades have become attractive. Also, freight cost from Malaysia is less compared to Nigeria, that makes the Malaysian grade cheaper," said a senior executive at Bharat Petroleum Corp.

    Malaysian oil supplies to India last month were the highest in six months, the data showed.

    Refiners in India normally buy Malaysian oil through term deals but BPCL recently procured barrels through spot tenders. Shell supplied Malaysian Kikeh and Miri grades to BPCL in October under a deal obtained through a spot tender.

    Last month, the Indian refiner for the first time also imported the Russian Sokol grade from Far East Russia, a high-quality crude that usually goes to refiners in nearby South Korea and Japan.

    Other spot values for Asia-Pacific crude loading in September fell to multi-year lows, as refinery margins weakened amid slowing regional demand and a buildup of product stocks, further boosting the shipments from East Asia.

    And at a time of slowing demand growth in China, India looks like the "brightest spot" for Asian barrels, said Ehasan Ul-Haq, senior analyst at London-based consultancy KBC Energy Economics.

    Still, India by far meets the bulk of its oil demand through supplies from Middle East, West Africa and Latin America, with Saudi Arabia regaining its top supplier status in October and Iraq falling back to the second slot.

    Crude futures have already lost around 60 percent of their value since mid-2014 due to a global oil glut that has sparked price competition among producers from West Africa to East Asia in a fight for global market share.

    Overall in October India imported nearly 9 percent more crude than a year ago at 3.94 million bpd, according to the shipping data.

    Read more at Reuters

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    Iran's Rouhani woos gas partners with capacity pledge

    Iran is dramatically increasing its natural gas export capacity in preparation for the lifting of international sanctions, President Hassan Rouhani said on Monday, as he courted foreign investment in the sector during a summit meeting in Tehran.

    Addressing Russian President Vladimir Putin and leaders of seven other countries including Algeria, Nigeria and Venezuela, Rouhani told the Gas Exporting Countries Forum (GECF) that Iran was seeking international partnerships to develop its vast oil and gas reserves.

    "I invite the leaders of the countries in this group to partner with Iran and invest in developing Iran's gas resources for mutual benefit," he said. "Iran is ready to play a bigger role in the supply of gas."

    The Tehran meeting of the GECF - which also includes Bolivia, Egypt, Equatorial Guinea, Libya and the United Arab Emirates - comes a week before Iran is due to unveil model contracts for future oil and gas development.

    The announcement, intended to lure back global energy companies, will be closely watched ahead of the expected lifting of economic sanctions against Iran. In return, Tehran agreed to long-term curbs on its nuclear programme in a landmark July deal with the so-called P5+1 powers.

    Rouhani said Iran had been working for two years to increase its gas production capacity via pipelines to neighbouring countries or liquefied natural gas (LNG) shipments further afield.

    Iran's gas production more than doubled over a decade to 160.5 billion cubic metres in 2012, before the latest sanctions took full effect, and Rouhani said capacity would surge to more than 1 trillion cubic metres in another two years.

    "The preparatory stages have been completed by the government so that the needed investments will be made," he said. "We believe that the situation will rapidly change with the recent agreements between Iran and the P5+1."

    The 12-member GECF claims to account for a combined 67 percent of the world's proven natural gas reserves.

    Read more at Reuters

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    Putin says long-term gas deals should not be scrapped

    Long-term supply contracts, the backbone of Moscow's gas deals with most European clients, should stay in place and not be replaced with an alternative mechanism, Russian President Vladimir Putin said on Monday.

    Speaking during the Gas Exporting Countries Forum (GECF) Summit in Tehran, Putin also said that Russia planned to supply Asia with 128 billion cubic metres of gas per year.

    Russian energy giant Gazprom has begun experimenting, selling some of its gas at spot tenders amid talk that it might increase a spot element in some contracts in future as well.

    Read more at Reuters
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    BG Group Secures Stake In Aphrodite Offshore Cyprus

    BG Group has taken a 35% holding in Block 12, which includes the Aphrodite gas discovery, offshore Cyprus, the company said in a news release.

    This upstream position provides a potential source of gas to Egypt where BG Group holds equity in the two train LNG export facility at Idku as well as LNG offtake rights to lift 3.6 mtpa.

    Operated by Noble Energy, the Aphrodite gas discovery is about 170 km south of Limassol.

    Completion of the transaction is subject to certain regulatory approvals as well as customary closing conditions, the release said.
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    Crude oil spiking on Saudi comments

    On Monday morning, West Texas Intermediate crude oil futures surged
    into the green, after being down by about 2%, to as high as $42.75 per
    barrel. Brent crude also rallied nearly 2%, to about $45.73 per

    The official news agency of Saudi Arabia released a statement saying
    the government was prepared to cooperate with other oil producers to
    ensure a stable market.

    "The cabinet stressed the Kingdom's role in the stability of the oil
    market, its constant readiness and continuing pursuit to cooperate
    with all oil producing and exporting countries," the statement said.

    Iran Sees OPEC Keeping Output Cap Unchanged at Next Meeting

    OPEC should make room for increased Iranian crude production within
    its ceiling of 30 million barrels a day, the nation’s oil minister
    said, adding the group will probably leave that limit unchanged when
    it meets next month.

    Iran has asked OPEC to accommodate its return to previous production
    levels when international sanctions are lifted, Bijan Namdar Zanganeh
    told reporters in Tehran. Iran plans to add 1 million barrels a day
    within five to six months of the curbs being removed and that increase
    should be within OPEC’s production ceiling, Amir Hossein Zamaninia,
    deputy minister for commerce & international affairs, said in Tehran
    on Saturday.

    Brent crude tumbled more than 60 percent since the middle of last year
    as OPEC followed Saudi Arabia’s strategy of defending its share of the
    global market against competitors such as U.S. shale producers. The
    Organization of Petroleum Exporting Countries, which accounts for
    about 40 percent of global supply, has been pumping above its target
    level for 17 months. It is scheduled to meet on Dec. 4 to discuss the

    “I don’t expect to receive any new agreement” at the OPEC meeting,
    Zanganeh said. “OPEC is producing more than its approved ceiling and I
    asked them to reduce production and to respect the ceiling, but it
    doesn’t mean we won’t produce more because it is our right to return
    to the market.”

    Iran was OPEC’s second-largest producer before sanctions over its
    nuclear program were tightened in 2012. The nation, which reached an
    agreement with world powers in July over the trade restrictions, is
    currently the group’s fifth-largest supplier, pumping 2.7 million
    barrels a day last month, according to data compiled by Bloomberg.

    “I sent a letter to OPEC to consider our return to the market and to
    manage it,” Zanganeh said. “We don’t need to receive any permission
    from any organization for our return to the previous level of
    production. It is a sovereign right.”

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    About 11.12bcm gas of ONGC shifted to RIL's KG-D6 - D&M

    US-based consultant D&M has said that about 11.12 billion cubic metres of natural gas worth INR 11,055 crore have flowed from idling Bay of Bengal blocks of the state-owned Oil and Natural Gas Corporation (ONGC) to neighbouring KG-D6 fields of Reliance Industries.

    DeGolyer and MacNaughton (D&M), in its report, established that reservoirs in ONGC's Krishna Godavari basin KG-DWN-98/2 (KG-D5) and the Godavari Producing Mining Lease (PML) are connected with Dhirubhai-1 and 3 (D1 & D3) field located in the KG-DWN-98/3 (KG-D6) Block of RIL.

    D&M said that "As of March 31, 2015, the FFRM (Full Filled Reservoir Model) estimated a gas migration of approximately 11.122 billion cubic metres from the Godavari-PML and KG-DWN-98/2 contract areas to KG-DWN-98/3."

    However, D&M is of the opinion that there exists one big gas resource several metres below sea bed which extends from Godavari PML and KG-D5 to KG-D6. Of the 58.68 bcm of gas produced from KG-D6 block since April 1, 2009, 49.69 bcm belongs to RIL and 8.981 bcm could have come from ONGC's side, D&M said in its 553-page report.

    At gas price of USD 4.2 per million British thermal unit, the volume of gas belonging to ONGC which RIL has produced comes to USD 1.7 billion (Rs 11,055 crore).

    ONGC had in 2013 claimed that RIL had deliberately drilled wells close to the common boundary of the blocks and that some gas it pumped out was from its adjoining block.

    RIL, on the other hand, has maintained that it has "scrupulously followed every aspect of the production sharing contract and has confined its petroleum operations within the (boundaries of its) KG-D6 block" in Krishna Godavari basin.

    D&M estimated that ONGC's Godavari-PML had 14.209 bcm of gross in-place reserves and KG-D5 another 11.856 bcm. RIL's D&D3 fields held 80.697 bcm gross in-place reserves.

    It said that of these, 12.80 bcm of Godavari-PML, 8.01 bcm of KG-D5 and 75.33 bcm of KG-D6 are connected.

    It added that 11.89 bcm of gas from ONGC blocks would have migrated to KG-D6 by January 1, 2017. This volume would rise to 12.713 bcm by May 1, 2019.
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    Saudi Arabia Edges Out Russia in China Oil Sales as OPEC Digs In

    Saudi Arabia reclaimed its position from Russia as the largest crude supplier to China as OPEC members extended their global fight for market share.

    The world’s biggest oil exporter sold 3.99 million metric tons to China in October, 0.8 percent more than in September, data from the Beijing-based General Administration of Customs showed on Monday. Angola, another member of the Organization of Petroleum Exporting Countries, also surpassed Russia in shipping crude to the Asian nation.

    China has become a battleground for oil producers who are seeking to defend sales amid a worldwide oversupply. Prices have slumped 40 percent since OPEC embarked on a strategy last November to keep pumping and drive out higher-cost competitors such as U.S. shale companies. The 12-member group is scheduled to meet next week and Venezuela has warned that crude could drop to as low as the mid-$20s a barrel unless action is taken to stabilize the market.

    “Saudi Arabia never stopped fighting for market share in China and in Asia as a whole,” Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, said by phone. “One year after OPEC announced its production policy to defend market share, their strategy seems to be working.”

    Saudi Arabia this year twice ceded the top spot to Russia in crude sales to China, in May and September. The kingdom accounted for about 15 percent of China’s imports in the first 10 months of this year, compared with 12 percent for Russia, according to the customs data.
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    Petrobras lost 2.29 mln barrels of oil to strike - filing

    Brazil's state-run oil company Petroleo Brasileiro SA said on Monday it had been unable to produce 2.29 million barrels of oil and 48.4 million cubic meters of natural gas during a strike that began on Nov. 1.

    Petrobras, as the firm is known, said the majority of unions representing oil workers had voted to end the strike, thought to be the most disruptive in 20 years. The largest union FUP proposed ending the strike on Nov. 14 though some hold-out unions continued.
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    Santos and the looming retail shortfall

    Santos' retail shareholders may have one more week to decide whether to buy into the company's $1.375 billion retail entitlement offer, but hedge funds are already tipping up to 70 per cent or almost $1 billion of rights will not be taken up.

    While Santos management has been out selling the deal to retail brokers, hedge funds reckon support for Santos shares will drop off this week as the company's newest and biggest investor Hony Capital steps out of the market.

    Hony, which bought a $500 million stake in Santos at $6.80 a share earlier this month, confirmed on Friday it had been topping up its stake at much lower prices in the secondary market. The buying helped Santos shares finish the week at $4.14, which was well clear of the $3.85 a share rights issue price.

    However, there is a limit to Hony's buying. The investor agreed to a 9.9 per cent cap as part of the strategic placement - although it is currently at 12.16 per cent until the retail component of the rights issue completes.

    Should Santos shares dip below $4 and towards the $3.85 a share rights issue price, it would be hard to see too many retail shareholders subscribing for new stock.

    Sources said it was also likely that hedge funds and institutional investors who had sub-underwritten the offer through brokers Citi, Deutsche Bank and UBS were likely to be managing their risk through a series of shorts ahead of the retail close.

    The retail offer is scheduled to close on November 30. Left over shares will be sold in an institutional bookbuild on Thursday, December 3.

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    Oil-Rig Count Declines in Latest Week

    The U.S. oil-rig count dropped by 10 to 564 in the latest week, according to Baker Hughes Inc., a bigger change than seen in recent weeks.

    The latest data represents a return to a drop after last week’s modest increase of two rigs broke a 10-week streak of declines.

    The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year.

    There are 65% fewer rigs from a peak of 1,609 in October 2014.

    According to Baker Hughes, the number of gas rigs was unchanged from last week at 193.

    The U.S. offshore-rig count was 30 in the latest week, down three from last week and down 23 from a year ago.

    For all rigs, including natural gas, the week’s total fell by ten to 757.

    Earlier this week, the U.S. Energy Information Administration said domestic crude-oil inventories rose by 252,000 barrels last week, less than expected by the market. However, U.S. oil inventories are near levels not seen for this time of year in at least the last 80 years.

    For most of 2015, Texas oil fields have led the pullback in rigs. But on Friday, Baker Hughes data showed that Texas gained three rigs in the last week, with losses coming in three other states. Wyoming and Colorado each shut down three rigs, and Oklahoma shut down four.

    Texas’ biggest oil and gas field, the Permian Basin in West Texas, idled five rigs last week, but gains elsewhere made up for that loss statewide.  The oil rig count for the Permian stood at 219 Friday, Baker Hughes said.

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    U.S. driving hits record for September -DOT

    The resurgence in U.S. driving continued with force in September, as motorists logged 259.9 billion road miles, a 4.3 percent bump from last year and the most in the month's history, according to new data released Friday by the U.S. Department of Transportation

    The strong September figures contributed to a record-breaking year for road miles in the United States, bucking predictions that Americans have lost their appetite for driving as the population ages and the youth migrate more to urban areas.

    Year to date, drivers have logged 2.36 trillion miles on U.S. roads, the highest figure through September in history and a 3.4 percent jump compared to the same stretch last year, DOT figures show. The year-over-year percentage increase is the largest since 1997, data shows.

    "It's a huge number," said Phil Flynn, an analyst with the Price Futures Group. "It shows you that drivers are being inspired by the low prices. It also shows you that the economy may have bottomed out and is on the uptick."

    With the September 2015 estimates, the series of consecutive monthly mileage increases now stands at 19 months

    The fresh numbers are the latest piece of evidence showing a sustained U.S. road revival that has been fueled by a rout in global petroleum prices and a growing U.S. economy. The national average price for gasoline on Friday was $2.10 per gallon, down from $2.85 a year ago, according to AAA, the motorists' advocacy organization.

    Driving activity in the United States is closely watched since the country accounts for about 10 percent of global gasoline demand.

    The surge in driving buoyed crack spreads and profits for U.S. refiners this summer, as they ran their plants at full tilt to take advantage of the increased demand. In August, U.S. refiners supplied 293.5 million barrels of gasoline, the highest amount since 2007, according the U.S. Energy Information Administration.

    Read more at Reuters

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    Russian energy minister says gas exporters' forum supports long-term contracts - RIA

    Russian Energy Minister Alexander Novak said on Saturday the Gas Exporting Countries Forum had reaffirmed the importance of long-term gas contracts, the take-or-pay mechanism, and a link between the gas price and the oil price, according to the RIA news agency.

    Participants of the Forum, which represents major gas exporting countries, are meeting today in the Iranian capital Tehran.

    Read more at Reuters
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    Halcon Resources Refinances More IOUs at High Interest Rate

    Halcon Resources, a company that “guessed wrong” by leasing 140,000 Utica Shale acres in the northern part of the play and currently doesn’t drill in any of that acreage, is one of the eight Marcellus/Utica companies on David Fessler’s “Oil Company Death List”.

    In August, Halcon refinanced $1 billion worth of outstanding IOUs with a third lien, paying a 13% interest rate on debts that had been 8.875% to 9.75%.

    Yesterday Halcon launched yet another offer–this time offering second liens for IOUs. The new interest rate offered is 12% for debts that previously had rates of 8.875% to 9.75%.

    We don’t pretend to understand high finance, but why would anyone, in these market conditions, purchase a second or third lien IOU? That means one or two other people are in line before you to collect money if the company defaults and can’t repay the IOUs, which seems like all too real a possibility…
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    Petronet near to winning better gas terms from Qatar-sources

    India's biggest gas importer Petronet LNG is close to renegotiating a major deal with its Qatari supplier Rasgas, lowering the cost of gas shipments and avoiding a $1.5 billion penalty fee for lifting less gas than agreed, two sources said.

    The renegotiation is another sign of how falling oil prices and a global gas glut are bringing producing giants such as Qatar to the negotiating table.

    Petronet, which has a 25-year contract with Rasgas to annually buy 7.5 million tonnes of liquefied natural gas (LNG) has reduced purchases by about a third this year due to high prices -- even though it is only allowed to take 10 percent less, making it liable for a $1.5 billion penalty.

    Petronet and Rasgas opened renegotiation proceedings during Qatari Emir Sheikh Tamim bin Hamad Al-Thani's visit to New Delhi in March.

    If India manages to renegotiate a deal with Qatar it would be Prime Minister Narendra Modi's biggest diplomatic win in the energy sector since coming to power last year. Indian oil minister Dharmendra Pradhan reinforced the need to renegotiate prices and quantity under the long term deal with Qatar during his visit to Doha this month.

    According to the sources the two firms are exploring the possibility of altering the contract's pricing formula, in which the LNG is valued based on a 60-month average of a basket of Japanese crude oil prices.

    Instead, a 3-month average of Brent crude is being considered, which would be a major coup for Petronet by lowering its LNG costs in line with sharply lower crude oil prices.

    Petronet currently pays about $12-$13 per million British thermal units (mmBtu) for Qatari LNG under a deal that began in 2004, compared with around $7-$8 per mmBtu for LNG in the spot market.

    Petronet has been increasingly substituting costly Qatari LNG with spot shipments. But the proposed revision should allow it to step up Qatari imports as prices fall.

    Under the new deal, Rasgas will also grant relief to Petronet from paying a $1.5 billion penalty on the condition that the Indian firm lifts full volumes in subsequent years, said one of the sources.

    Rasgas was not immediately available for comment, while Petronet LNG's head of finance R. K. Garg did not respond to a request for comment.

    Read more at Reuters

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    Vaca Muerta ‘to double output by 2018’

    Argentina’s Vaca Muerta shale play is expected to double production by 2018 although it will need more joint venture deals to become fully developed,according to a new study.
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    Scant signs of Russia-OPEC output cut deal ahead of Vienna meeting

    There is little likelihood Russia will work with OPEC on cutting oil output ahead of or on the sidelines of a meeting of the exporter group in Vienna next month, officials and industry insiders say.

    OPEC made a historic policy shift late last year, led by Saudi Arabia and backed by its Gulf allies, and refused to cut production to prop up sliding prices in order to defend market share. The group confirmed the strategy at a meeting in June.

    Organization of the Petroleum Exporting Countries ministers will meet on Dec. 4 to coordinate the group's production, and a delegation from Russia, which accounts for about 12 percent of global oil output, may take part in a pre-meeting consultation once again.

    A source close to the consultations said that Venezuela, an OPEC member which has been a proponent of output cuts, is keen to organise a meeting with non-OPEC countries beforehand.

    "Russia's stance has not changed: we will make no cuts in oil production," the source said.

    Russia, which depends heavily on oil revenues for its budget, has so far staunchly resisted making cuts to production, in part because it is locked in a battle for market share and knows a cut could see it cede ground.

    Any cuts would therefore need to be synchronised with OPEC.

    Russian officials have said that domestic companies would not be able to easily restart wells if they close them as part of any production cuts due to the harsh climate of Siberia, its oil heartland.

    They also say that the government is unable to order companies to curb output as many of the oil producers are privately held.

    On Friday, Russian Energy Minister Alexander Novak said he was ready to attend consultations in Vienna on Dec. 3, but that there had been no formal arrangements or invitations so far. He gave no indication of Russia's readiness to cut oil production.

    "We are discussing the situation, the prospects, the value of oil production, the balance of demand and supply," Novak told reporters.

    Analysts say Russian companies are quite resilient in the face of falling prices of Urals blend, Russia's top crude oil grade, which have plunged from their June 2014 peak of more than $111 per barrel to just over $40 currently.

    "Despite the recent fall in oil prices, Russian production continued to accelerate as oil producers remained profitable even in the lower oil price environment, helped by the effect of the weak rouble on costs and lower taxes, which decline in a lower oil price environment," Bank of America Merrill Lynch said in one of its reports.

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    Alternative Energy

    Germany's Solar output: towards december lows.

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    Unilever aims to use only renewable energy by 2030

    Consumer goods maker Unilever said it would switch to using only renewable energy by 2030 and would stop using energy from coal by 2020, as businesses jostle to highlight their green credentials ahead of a global climate summit.

    World leaders were set to meet in Paris from Nov. 30 to Dec. 11 to agree on a plan to curb global warming.

    Unilever was among 81 companies, along with rivals Nestle and Procter & Gamble, that have signed up to set emissions targets for their businesses with the aim of limiting global warming to less than 2 degrees Celsius.

    Unilever Chief Executive Paul Polman is a leading advocate for the idea that there is a business case for sustainability even as his company's sales have slowed under the weight of a weak margarine business and slowing emerging market economies.

    "If we don't tackle climate change we won't achieve economic growth. This is an issue for all businesses, not just Unilever. We all have to act," Polman, who will attend the talks in Paris, said in a statement.

    Polman is part of a group of business leaders who want governments to commit to zero net emissions by 2050.

    Under targets set in 2010, Unilever said it aimed to be eventually wholly powered by renewable energy, setting an interim target for renewables to meet 40 percent of its energy needs by 2020. It is now raising the 2020 target to 50 percent and aiming for 100 percent by 2030, up from 28 percent in 2014.

    Unilever said it wants all the electricity it buys from the grid to come from renewable sources by 2020 and will seek to support renewable energy generation, so by 2030 it can make a surplus available to markets and communities where it operates.

    Earlier this year, IKEA, the world's biggest furniture retailer, said it plans to invest heavily in renewable energy as it seeks to generate all the energy used in its shops and factories from clean sources by 2020.

    Unilever says it has saved over 400 million euros ($424 million) through eco-friendly measures taken at its factories since 2008 and says its brands that most fully embrace sustainability - such as Dove, Lifebuoy, Ben & Jerry's and Comfort - perform the best.

    Read more at Reuters
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    Spanish renewable energy firm in bankruptcy protection steps

    Spanish renewable energy and engineering giant Abengoa says it has begun bankruptcy protection proceedings in a bid to avoid what could be one of the country's largest insolvencies.

    Abengoa told Spain's market regulator in a statement Wednesday that it will be seeking preliminary protection from creditors with the aim of reaching a deal on its debts within four months.

    The statement came after a Spanish technology firm announced it was pulling out of an agreement to help invest in the Seville-based firm.

    Abengoa, which has some 24,000 employees worldwide, has debts worth some 9 billion euros ($9.5 billion).

    Abengoa shares were down by nearly 50 percent at 0.47 euros in early afternoon trading in Madrid.
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    French businesses pledge funds to fight global warming

    A group of 39 French firms, including oil and gas major Total and nuclear group Areva, pledged to invest at least 45 billion euros ($48 billion) during the next five years in renewable energy and low-carbon technologies.

    The promise, made on Thursday, comes as world leaders gather in Paris ahead of a two-week climate summit in the French capital from Nov. 30 to Dec. 11.

    The meeting aims to agree on a plan to curb global warming by keeping the temperature rise below a ceiling of 2 degrees Celsius.

    The group of businesses, including utility EDF, telecoms company Orange and bank Societe Generale have a combined revenue of about 1.2 trillion euros ($1.3 trillion).

    The companies said signing the pledge was their contribution in the fight against climate change.

    "It is a commitment to a low-carbon economy, and these are all new funds that will be invested," Total Chief Executive Officer Patrick Pouyanne said at a joint news conference.

    "Out of the 45 billion, we as Total intend to invest more than 4 billion euros in the next five years, particularly in solar, but also in bio fuels," Pouyanne added.

    The companies said they also plan to provide bank and bond financing of at least 80 billion euros for climate change projects, and foresaw around 15 billion investments in new nuclear capacities and 30 billion euros in gas as an energy transition solution.
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    UK scraps 1 bln stg carbon capture technology scheme - govt

    Britain has scrapped plans to spend up to 1 billion pounds to help support projects that capture carbon dioxide emissions and store them underground, the government said on Wednesday.

    "Following the Chancellor's Autumn Statement, HM Government confirms that the 1 billion pound ring-fenced capital budget for the Carbon Capture and Storage (CCS) Competition is no longer available," the government said in a statement to the stock exchange.

    Read more at Reuters
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    German battery maker launches scheme to share solar power

    German battery maker Sonnenbatterie has launched a scheme to connect households with solar panels and other consumers, aiming to better distribute surpluses of the renewable energy and help members to become more independent of conventional suppliers.

    The start-up company hopes the scheme, called "sonnenCommunity", will boost demand for its batteries which store solar power, allowing owners to use the clean energy even when weather conditions are not favourable.

    "SonnenCommunity allows all households that want to determine their energy futures themselves the access to affordable and clean electricity," said chief executive Christoph Ostermann at the project's launch on Wednesday.

    The initiative comes at a time when battery technology, long seen as expensive, is approaching a point where ordinary householders can afford it.

    By storing solar power and releasing it on demand, households can avoid having to buy more expensive power off the grid to supplement their production. The batteries could also help solar power households cope with a phasing out of subsidies currently paid when surplus power is sold to public grids.

    Sonnenbatterie has sold 8,500 lithium battery units, saying this makes it the European market leader.

    Germany has around 25,000 batteries in operation that can store solar power - still a small number given there are around 1.5 million solar production units, mostly located on roofs of family homes - but year-on-year sales are growing rapidly.

    U.S. electric vehicle maker Tesla is also looking to enter the market. It plans to start delivering wall-mounted batteries that can store solar power to Germany in early 2016.

    SonnenCommunity takes the storage idea a step further, allowing solar power to be shared among its members.

    Sonnenbatterie said the scheme would initially target the 1.5 million solar power producers who, if they sign up to the community, will receive a battery storage system with a starting price of 3,599 euros ($3,812). But eventually, the offer will also be open to non-producers, it added.

    Read more at Reuters
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    Las Vegas Going Green in Deal to Run City With Only Clean Power

    Las Vegas is going green. The city is planning to run municipal buildings, fire stations, parks, streetlights and other facilities exclusively with clean power, under a deal announced Tuesday with the Berkshire Hathaway Inc.-owned utility NV Energy Inc. The agreement doesn’t cover the famously bright casinos on the Las Vegas Strip.

    The city’s shift is a sign that renewable energy is becoming competitive with electricity generated from fossil fuels. It comes less than a week before an international conference aimed at completing a global pact on reducing greenhouse-gas productions begins in Paris.

    “We will become the first city of our size in the nation to achieve 100 percent renewable energy for city operations,” Las Vegas Mayor Carolyn Goodman said in a statement.

    NV Energy already provides some clean power to Las Vegas, and that will be boosted with energy from a 100 MW solar farm under development in nearby Boulder City. The proposal requires the approval of the Public Utilities Commission of Nevada and the Las Vegas City Council.

    The city of Las Vegas had a population of almost 614,000, according to a 2014 estimate from the U.S. Census. That’s considerably more than the 50,000 residents who live in Georgetown, Texas, which in March said it would power itself entirely with renewable energy.
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    Yingli Green Energy Announces Preliminary Financial Results for Third Quarter 2015

    Yingli Green Energy Holding Company Limited, one of the world's leading solar panel manufacturers, today announced that it plans to release its unaudited financial results for the quarter ended September 30, 2015, before the U.S. market opens on December 2, 2015.

    Based upon preliminary data, the Company expects that its total net revenues in the third quarter of 2015 were in the range of US$340 million to US$350 million, in line with the management's previous estimation. In addition, the Company estimates that its overall gross margin in the third quarter of 2015 was in the range of 8% to 9%, increased from 6.3% in the second quarter, as a result of increase in average selling price and decrease in unit cost of PV modules. Meanwhile, the Company estimates that its PV module shipments (excluding OEM production for third parties) in the third quarter of 2015 were in the range of 450MW to 460 MW, compared to its previous guidance of 550MW to 580MW. The lower-than-expected shipments were due to a lower-than-expected utilization of production facilities for in-house PV module.

    Further to the Company's announcement on September 8, 2015, the Company expects to recognize a non-cash impairment charge on long lived assets totaling RMB3,694.2 million (US$581.3 million) in the third quarter of 2015, which was mainly due to the lower-than-expected utilization of certain production facilities of the Company in 2015.

    These preliminary, unaudited third quarter results are based on management's preliminary review of operations for the third quarter of 2015 and remain subject to change based on management's ongoing review of the third quarter results.

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    Brazil Sets Rules for $4.6 Billion Hydropower Auction

    Brazil is planning to auction more than 6 gigawatts of hydroelectric dams Wednesday, offering the chance to add billions of reais in anticipated licensing fees to help reduce a widening budget gap.

    Brazil’s Senate approved Tuesday rules for the event, where the government is expected to sell the rights to operate the 29 existing power plants. The vote was 44 for to 20 against.

    The auction will test the country’s ability to attract investment amid an economic recession, the widest budget deficit on record and uncertainty over President Dilma Rousseff’s political survival. The government expects to raise 11 billion reais ($3 billion) in concession fees from the auction in the current fiscal year and another 6 billion reais next year.

    "The auction is important and we expect to have a good result," Planning Minister Nelson Barbosa told reporters in Sao Paulo Tuesday.

    The proceeds of the auction, however, won’t be booked by the government until next year, according to the senator responsible for the revenue report of the 2016 budget bill.

    “I spoke this afternoon with Energy Minister Eduardo Braga and he said the 17 billion reais in revenue from the auction of hydroelectric dams will be effective only in 2016,” Senator Acir Gurgacz said after the vote.

    The press offices for Minister Braga and the Finance Ministry weren’t immediately available to comment after usual business hours.


    The vote comes as the government recovered some support in Congress in recent weeks, after members of the ruling coalition balked at approving Finance Minister Joaquim Levy’s proposals to boost taxes and cut spending.

    The auction was initially planned for September and has been postponed three times. The concession contracts have already expired or are about to do so. The hydropower plants were previously managed by companies that didn’t accept contract renewals in 2012 when the government changed some rules in an effort to reduce power prices.

    The dams in the states of Goias, Minas Gerais, Parana, Santa Catarina and Sao Paulo have been divided into five groups. The largest includes the 1.5-gigawatt Jupia and the 3.4 gigawatt Ilha Solteira dams, previously managed by Cia Energetica de Sao Paulo.

    Companies that submit the lowest bids will win 30-year contracts to operate the dams. They must pay the entire amount in advance and will recover their investment over the three-decade period.

    Spot market

    The government is letting foreign companies compete for the contracts and also will permit winners to sell 30 percent of the energy on the spot market, starting in 2017.

    "The new rule that allows companies to sell in the spot market is attractive for investors," Thais Prandini, director at the energy consulting Thymos Energia, said in a telephone interview. "Companies can take good profit from the spot market in Brazil." Spot power prices have increased in Brazil since a record drought hit the country in 2013.

    China Three Gorges Corp., the worlds’ biggest dam operator, is considering bidding. Banco do Brasil said Oct. 26 that some banks are planning a pool to finance the bids.
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    SunEdison plans to offload 400 MW of solar power capacity in India - sources

    U.S. solar company SunEdison Inc said it would sell projects in India with generating capacity of 425 megawatts (MW) to its "yieldco" TerraForm Global Inc for $231 million.

    Heavily indebted SunEdison said earlier this month that it would stop selling projects to its two yieldcos - dividend-paying units that hold generating assets of a parent solar or wind power company - until market conditions improved.

    "We'll go through evaluation of good opportunities and wherever it makes sense we'll continue to transact with the cash available in our yieldcos already," Pashupathy Gopalan, SunEdison Asia Pacific's president, told Reuters on Tuesday.

    Shares of the company, which also said a unit had repaid almost all money related to a margin loan with Deutsche Bank, rose as much as 16.3 percent.

    "We believe a significant portion of the recent volatility around the company and its subsidiaries has been attributed to the margin loan," SunEdison Chief Executive Ahmad Chatila said in a statement.

    Up to Monday's close, SunEdison's shares had lost nearly 69 percent of their value since Oct. 7 when the company said it would stop sales of renewable energy assets to its "yieldcos" and sell more projects to third parties. Sales to third-parties generally mean higher prices for the assets.

    SunEdison, which grew quickly through acquisitions, has been plagued by liquidity concerns, and the company reported a bigger-than-expected quarterly loss earlier this month.

    TerraForm Global, whose shares fell as much as 7.5 percent to $5.02 on Tuesday, has canceled plans to buy other assets to buy SunEdison's projects, SunEdision said.

    SunEdison operates Indian solar plants with capacity of about 450 MW. It has another 800 MW of capacity under development and recently won a tender for a 500 MW plant in the state of Andhra Pradesh.

    "We continue to expand in India ... It will become a country of even more importance for us," Gopalan told reporters earlier on Tuesday.

    India is targeting 100 gigawatts of solar power by 2022, or about 33 times today's level, to help to address chronic power shortages.

    Gopalan said SunEdison continued to look at selling projects in various countries to raise capital.

    "To grow you need capital. Our balance sheet does not have the necessary capital," he said.

    SunEdison has terminated a deal to buy Continuum Wind Energy, which has most of its assets in India, he said.

    Read more at Reuters

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    TransCanada, Enbridge Among Winners From Alberta's Carbon Policy

    The race to find winners from Alberta’s low-carbon policies is on with analysts betting renewable energy developers such as Enbridge Inc. and TransCanada Corp. will be among the best placed to make the shift.

    Companies poised to gain will be those able to finance new wind and solar power projects, as the government boosts the province’s share of renewable electricity to 30 percent from 9 percent by 2030. TransAlta, meanwhile, surged 9.5 percent Monday as investors bracing for the worst were buoyed by Alberta’s pledge to compensate coal-power generators for phasing out their plants by 2030.

    “These renewable power contracts are going to go to the bidder that needs the least amount of government support, developers with most financial flexibility and overall lowest cost of capital” such as Enbridge and TransCanada, Patrick Kenny, a Calgary-based analyst at National Bank Financial, said in a phone interview.

    Alberta Premier Rachel Notley on Sunday unveiled sweeping changes to the province’s climate policy with a faster transition from coal to more renewable and gas power; an economy-wide carbon price and a cap on oil-sands emissions. As much as C$15 billion ($11.2 billion) will have to be invested in new electricity generation, according to National Bank. Spending on power distribution and technology to lower greenhouse gases from oil and gas production is also expected.

    Renewable Power

    Enbridge and TransCanada are already among Canada’s largest renewable power operators. Enbridge owns 2,065 megawatts of wind power across the country, enough to power 650,000 homes, while TransCanada operates wind, hydro and nuclear plants as part of its 11,800 megawatts of power generation.

    TransCanada is “ideally situated” to play a role in the switch from coal and has invested successfully in other places that have transitioned to renewable energy including Ontario, Mark Cooper, a spokesman, said in an e-mail.

    The plan will give certainty for the development of “much-needed energy infrastructure investments,” Al Monaco, chief executive officer of Enbridge, said in a statement. Graham White, a spokesman, declined to comment further.

    TransAlta’s renewable division, which the company spun off in an initial public offering in 2013, along with companies such as Berkshire Hathaway Inc.’s AltaLink transmission business, are set to benefit, said Ernst & Young LLP’s Gerard McInnis.

    “There are significant opportunities for investment in the grid and distribution,” said McInnis, a partner who leads the power and utilities practice in Canada. “And there will likely be new entrants to the market.”

    TransAlta Renewables on Monday said it would invest C$540 million in three of its parent’s projects, including renewable energy, while Alberta Investment Management Corp. bought shares in the renewable division, whose shares were little changed.

    The climate plan is a “net negative” for Alberta power generators that have stakes in six coal-fired plants being closed before the end of their lifespan, including TransAlta and Capital Power Corp., said National Bank Financial’s Kenny. Coal-plant owners will find it tough to keep their power supply competitive before the end of the phase-out period, with a carbon tax about 2.5 times higher than previous assumptions, Kenny said.
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    SunEdison shakes up top management at yieldcos

    SunEdison Inc said the chief executives of its two "yieldcos" had stepped down and that its chief financial officer would take charge at the units, suggesting that the U.S. solar company could potentially unify all its units under one company.

    "You could potentially see unification of the three companies, that'd provide SunEdison more assets to sell to the third parties and increase its cash flow," S&P Capital IQ analyst Angelo Zino said, adding that Monday's shakeup is really step one of what one could see down the road.

    SunEdison raised fresh liquidity concerns earlier this month after it posted a bigger-than-expected loss and said it would stop selling projects to its two "yieldcos" - dividend-paying units that hold solar, wind or other power assets for the parent company.

    The yieldcos - TerraForm Power Inc and TerraForm Global Inc - had become an important source of funding for the solar industry bellwether.

    But the yieldcos have taken a beating this year in part because low oil prices have reduced investor interest in all renewable energy stocks.

    Zino said it was "extremely expensive to have three publicly traded entities out there, especially if two of them really don't have as much use as they did several months ago."

    TerraForm Power's shares had fallen 70 percent this year through Friday close, while TerraForm Global stock had lost 65 percent since its IPO in July.

    SunEdison said on Monday Chief Financial Officer Brian Wuebbels will assume additional roles of chief executive at the yieldcos.

    The chief financial officer of the yieldcos had also stepped down and will be succeeded by Rebecca Cranna, the company said.

    Cranna was most recently CFO at Global Asset Management for SunEdison.

    The company also said TerraForm board members Perez Gundin, Mark Florian, Mark Lerdal and Steven Tesoriere had resigned.

    SunEdison said it named Peter Blackmore, Jack Jenkins-Stark and Christopher Compton to its board.

    Major hedge funds, including Third Point Investors and David Einhorn's Greenlight Capital, have slashed their stakes in SunEdison over the past few weeks.

    SunEdison's shares had lost nearly 62 percent of their value since Nov. 10, when the company said that it would stop sales of renewable energy assets to its "yieldcos".

    Read more at Reuters
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    SunEdison's problems cast shadow over future of solar yieldcos

    SunEdison Inc's decision to halt sales of solar power plants to its dividend-paying "yieldco" units has drawn attention to the company's missteps at a time when the oil price slump has claimed renewable energy stocks as collateral damage.

    So-called yieldcos are publicly traded entities that house solar and wind projects sold to them by their parent companies.

    These units have long-term agreements to sell power, giving them stable cash flows, but they are dependent on the transfer of assets from their parents to increase dividends.

    Yieldcos are supposed to be safe bets for people looking to invest in the volatile solar market, which is why SunEdison's decision has prompted a selloff in its stock and raised fresh questions about the viability of the yieldco model.

    Some analysts and investors think SunEdison lost the plot as it tried to grow too quickly through acquisitions it couldn't afford, leaving it with little choice but to sell assets to third parties for higher prices rather than to its own units.

    So, they say, it's unlikely rivals will follow SunEdison's lead and halt sales to their asset-holding businesses.

    SunEdison, run out of Belmont, California, has lost two-thirds of its value since it said on Oct. 7 that it would halt so-called "asset drop downs". The company's stock hit a three-year low of $2.55 on Friday.

    "It's more a reflection of SunEdison's strategy than the yieldco structure," said Hood River Capital portfolio manager Brian Smoluch. "I wouldn't throw out the whole asset class."

    SunEdison's total debt of $11.67 billion is more than 10 times its market capitalization of about $900 million, according to Thomson Reuters data.

    Renewable energy companies such as SunPower Corp and Transalta Corp have reassured investors that their plans to sell assets to their yieldcos remain intact.

    In fact, a drop in prices of yieldco stocks have opened up buying opportunities, investors say.

    Yieldcos of companies such as NRG Energy Inc and NextEra Energy Inc are good bets because the parents hold many assets that can be dropped down, they said.

    Prices for all yieldcos have fallen sharply this year, caught up in a selloff caused by weak oil prices.

    Up to Thursday's close, SunEdison's yieldcos - TerraForm Global Inc and TerraForm Power Inc - had lost about two-thirds of their value.

    NRG Yield Inc shares have dropped about 39 percent, while Nextera Energy Partners LP's have fallen about 23 percent.

    "All yieldcos are not created equal," said Rob Thummel, portfolio manager at Tortoise Capital Advisors LLC, adding that the yieldco structure remained the best way to play rising demand for solar and wind energy.

    Read more at Reuters
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    Canada's Alberta to introduce economy-wide carbon tax in 2017

    The Canadian province of Alberta, home to the country's controversial oil sands, said on Sunday it will implement an economy-wide tax on carbon emissions in 2017, addressing long-standing criticism it is not doing enough to combat climate change.

    The provincial government estimated the plan, including a pledge to phase out pollution from coal-fired electricity generation by 2030 and a limit on emissions from the province's oil sands industry, would generate C$3 billion ($2.25 billion) in annual revenue.

    Backed by prominent representatives from industry and the environmental movement, Premier Rachel Notley said the province was trying to do the right thing for the future.

    Notley's left-leaning New Democratic Party took power earlier this year, ending 44 years of Conservative rule.

    "It will help us access new markets for our energy products, and diversify our economy with renewable energy and energy efficiency technology," Notley said in Edmonton. "Alberta is showing leadership on one of the world's biggest problems."

    Alberta has the world's third largest crude reserves, but its oil sands industry is also Canada's fastest growing source of greenhouse gas emissions.

    That status has prompted fierce opposition from environmental groups to proposed pipelines that would allow the industry to access new markets, including the recently rejected Keystone XL pipeline, proposed by TransCanada Corp.

    U.S. President Barack Obama rejected that project on Nov. 6, explaining that "shipping dirtier crude oil" into the United States would not enhance the country's energy security.

    Alberta's energy sector has also been hammered with thousands of layoffs in recent months due to slumping global oil prices.

    The government said all oil sands operators would still be allowed to increase their combined annual carbon pollution from about 70 million tons to a maximum of 100 million tons per year under proposed legislation.

    It said this plan was endorsed by several major oil companies, including Suncor Energy, Cenovus, Canadian Natural Resources Ltd and the Canadian division of Royal Dutch Shell Plc.

    Environmental groups, including the Pembina Institute, Forest Ethics and Environmental Defence Canada, also endorsed the plan, the province said.

    The province estimated its new plan would cost the average household about C$320 per year in 2017 and C$470 per year in 2018.

    Notley will bring her plan into a meeting of Canadian premiers with Prime Minister Justin Trudeau, to prepare Canada's national strategy at the upcoming Paris climate change summit.

    Read more at Reuters

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    Bangladesh fires up large-scale solar to boost power generation

    The government of Bangladesh has approved construction of a large-scale solar park as part of a push to increase the share of power from renewable sources in this electricity-starved country.

    The new solar park, which is due to begin generating within the next 18 months, will supply up to 200 megawatts (MW) of electricity to the national grid.

    Sun Edison Energy Holding (Singapore) Pte Ltd will build the park in Teknaf sub-district, the southernmost point in mainland Bangladesh.

    The solar power will be cheaper than electricity from conventional power stations. The tariff rate has been fixed at Tk 13.26 per kilowatt/hour ($0.17), two-thirds the price of electricity generated by oil-fuelled plants.

    Teknaf is one of several large projects in the pipeline as the government aims to reach a target of 2,000 MW, or 10 percent of overall capacity, generated from renewable sources by 2020.

    Current daily grid generation is 7,000 MW, against a peak demand of 8,500 MW, although the actual need is certainly higher since only 62 percent of the population have access to electricity through the grid.

    The government plans to increase installed capacity to 20,000 MW by the end of the decade. Ahmad Kaikaus, an official at the ministry of power, energy and mineral resources, said in an interview that the government hopes that 500-600 MW of this will be generated by public-sector solar power plants.

    "We have asked public-sector power companies to set up equipment for generating electricity from solar," Kaikaus said. "They are carrying out feasibility studies."

    Kaikaus said that in addition, scores of local and foreign private-sector companies are submitting preliminary proposals to invest in solar power generation, with projects ranging in size from 5-100 MW, and the government is so far considering 14 of these.

    Taposh Kumar Roy, chairman of the Sustainable and Renewable Energy Development Authority (SREDA), identified a shortage of uncultivated land in this densely populated country as a significant constraint to planning large-scale solar plants.

    "Large-sized solar power plants need a huge area of land to install solar panels. In Bangladesh such barren field is hardly available. Our policy is to set up such plants only in non-agriculture lands to keep food production unhampered," he said.

    Among the places solar panels could be placed is on rooftops of residential, commercial and industrial buildings, he said.

    At present, renewables account for 405 MW, or around 5.7 percent, of Bangladesh's total daily electricity generation.

    This includes 150 MW from solar home systems, and 11 MW from rooftop systems. A further 230 MW are generated by hydropower.

    The government also is collecting data on wind power potential from 13 locations, he said.

    According to Roy, some $2.76 billion will be required to implement both large- and small-scale solar projects in the country, of which $2.23 billion is expected to come from development partners, with the rest from government and the private sector.

    Ruhul Quddus, a World Bank consultant on solar home systems in Bangladesh, said renewable energy has become cost-effective as technology constantly improves.

    Quddus said an investment of around $1 billion by the state-owned Infrastructure Development Company Ltd (IDCOL) has enabled the installation of some 3.7 million solar home systems since 2009, as well as solar-powered irrigation pumps and mini-grids.

    The home systems have eliminated the need for 180,000 tonnes of kerosene fuel, saving an estimated $225 million annually, he said.

    According to IDCOL, more than 65,000 solar home systems are now being installed each month. The company aims to finance 6 million systems by 2017, increasing the estimated generation capacity from the systems to 220 MW.

    Read more at Reuters

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    139 Countries could be self sufficient in energy by 2050

    Mark Jacobson and Mark Delucchi have done it again. This time they’ve spelled out how 139 countries can each generate all the energy needed for homes, businesses, industry, transportation, agriculture—everything—from wind, solar and water power technologies, by 2050. Their national blueprints, released Nov. 18, follow similar plans they have published in the past few years to run each of the 50 U.S. states on renewables, as well as the entire world. (Have a look for yourself, at your country, using the interactive map below.)

    The plans, which list exact numbers of wind turbines, solar farms, hydroelectric dams and such, have been heralded as transformational, and criticized as starry eyed or even nutty.

    Determined, Jacobson will take his case to leaders of the 195 nations that will meet at the U.N. climate talks, known as COP 21, which begin in Paris on Nov. 29. His point to them: Although international agreements to reduce carbon dioxide emissions are worthwhile, they would not even be needed if countries switched wholesale to renewable energy, ending the combustion of coal, natural gas and oil that creates the vast majority of those emissions, and without any nuclear power. “The people there are just not aware of what’s possible,” says Jacobson, a civil and environmental engineering professor at Stanford University and director of the school’s Atmosphere and Energy Program. He is already scheduled to speak twice at the meeting, and will spend the rest of his time trying to talk one on one with national leaders and their aids.

    Mark Jacobson and Mark Delucchi have done it again. This time they’ve spelled out how 139 countries can each generate all the energy needed for homes, businesses, industry, transportation, agriculture—everything—from wind, solar and water power technologies, by 2050. Their national blueprints, released Nov. 18, follow similar plans they have published in the past few years to run each of the 50 U.S. states on renewables, as well as the entire world. (Have a look for yourself, at your country, using the interactive map below.)

    The plans, which list exact numbers of wind turbines, solar farms, hydroelectric dams and such, have been heralded as transformational, and criticized as starry eyed or even nutty.

    Determined, Jacobson will take his case to leaders of the 195 nations that will meet at the U.N. climate talks, known as COP 21, which begin in Paris on Nov. 29. His point to them: Although international agreements to reduce carbon dioxide emissions are worthwhile, they would not even be needed if countries switched wholesale to renewable energy, ending the combustion of coal, natural gas and oil that creates the vast majority of those emissions, and without any nuclear power. “The people there are just not aware of what’s possible,” says Jacobson, a civil and environmental engineering professor at Stanford University and director of the school’s Atmosphere and Energy Program. He is already scheduled to speak twice at the meeting, and will spend the rest of his time trying to talk one on one with national leaders and their aids.

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    Dow predicts EPA review of herbicide safety resolved soon

    Dow Chemical Co expects environmental safety concerns about its new herbicide Enlist Duo to be resolved, the company said Wednesday, after the government asked a federal appellate court to pull regulatory approvals while the chemical's safety is re-examined.

    The U.S. Environmental Protection Agency (EPA) approved Enlist Duo for sale and use in several U.S. states over a year ago. But the agency has since found its assessment of the product's two active ingredients was incomplete, according to EPA's court documents, filed late Tuesday with the U.S. Court of Appeals for the Ninth Circuit in California.

    Enlist Duo is a new combination herbicide aimed at combating weeds that have become resistant to glyphosate -- a widely-used herbicide in the United States and the active ingredient of Monsanto Co's Roundup product.

    Enlist Duo combines glyphosate with another herbicide, 2,4-D, and is meant for use on corn and soybeans that have been genetically altered to tolerate it.

    The EPA wants to study the product further after it found that the company's Dow AgroSciences unit claimed the two active ingredients work better together, according to court documents. EPA said its study assumed the components did not have such "synergistic effects."

    "The information suggests that EPA's analysis may have understated the phytotoxicity of the product," the EPA said in the court filing.

    Dow Chemical said it has sent the EPA all of its data to provide further assurances for Enlist Duo. The company did not rule out changes to instructions for use on the existing product label.

    Dow told Reuters on Wednesday it will respond to the EPA's petition by the court's Dec. 7 deadline and expects any questions to be resolved in time for U.S. farmers to use it next season.

    The move by the EPA is tied to a lawsuit filed by U.S. farmer and environmental groups, who are trying to get the regulatory approval of Enlist Duo permanently overturned. The critics claim the EPA had not adequately analyzed the impact of 2,4-D before granting approval.

    This current regulatory issue could create a problem for Dow and its plans to sell off its agribusiness division, at a time when mergers and acquisitions talk is roiling.

    Dow said last month it would "review all options" for its farm chemicals and seeds unit, which has reported falling sales for nearly a year.

    If new federal regulatory approvals for Dow's Enlist Duo are not eventually granted by the EPA, it could negatively impact Dow's EBITDA in 2020, Bernstein analyst Jonas Oxgaard wrote Wednesday, and reduce "the sales price of Dow ag by $2-$3 billion."

    Read more at Reuters

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    Syngenta looking at takeovers, JVs, asset sales

    Syngenta, which fended off a $47 billion takeover approach from Monsanto three months ago, is itself looking at takeovers, joint ventures or asset sales, the Swiss company's chairman told a newspaper on Wednesday.

    "The role that we want is an active one and that is reflected in how we negotiate. Takeovers, joint ventures or partial sales are under consideration," Swiss newspaper Tages-Anzeiger quoted Michel Demare as saying in a joint interview with interim CEO John Ramsay published on Wednesday.

    "I would be surprised if no transaction materialises in the next half year," Demare added.

    There has been a chorus of voices in the industry predicting a sector shake-up since Monsanto walked away from its takeover proposal and Demare has previously said that tie-ups were being discussed intensively.

    Demare has said that the successful company in the future will be one that can combine seeds and crop chemicals as part of an integrated offer.

    Asked about a possible combination with Dupont, interim CEO Ramsay said the products of both groups were very complementary and noted that no company had signed more collaboration agreements with Syngenta over the past few years than DuPont.

    Chairman Demare added that Syngenta was speaking to all players in the industry.

    "We leave no stone unturned."

    He said that any takeover of Syngenta by a rival would depend on Syngenta shareholders getting a fair share of the synergies and an appropriate compensation payment in case the transaction got blocked by regulators was also a must.

    "That wasn't the case with Monsanto."

    Syngenta is the leader in crop chemicals with a 19 percent market share last year, just ahead of German company Bayer's CropScience division with 18 percent.

    Monsanto is the leader in seeds with a 26 percent market share, followed by Dupont Pioneer's 21 percent.

    Read more at Reuters
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    $3.5B Saskatchewan potash mine put on hold

    Low potash prices have made the prospect of developing the Kronau potash mine in Saskatchewan uneconomic.

    In a letter to the community of Kronau, located 28 kilometres northeast of Regina, Vale SA stated that it would wait until market conditions improve to construct the $3.5 billion solution potash mine. Vale Potash currently has about 30 people working on the project, mainly in Regina.

    According to a project page on its website, Vale says the Kronau mine would produce 3 to 4 million tonnes of potash a year for a minelife of over 40 years. Construction would employ around 2,000 and once completed, the mine would create about 350 permanent positions.

    However development of the mine was shelved once before, in 2012, and virtually no work has been done on the site.

    Potash prices are in a multi-year slump, with producers of the fertilizer ingredient feeling the pain.
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    Syngenta sues Cargill, ADM in GMO corn fight

    Swiss seed company Syngenta AG has sued top U.S. grain exporters Cargill Inc and Archer Daniels Midland Co over losses that U.S. farmers said they suffered from rejections of boatloads of genetically modified corn by China.

    The lawsuit, filed on Thursday in U.S. district court in Kansas, comes after Cargill, ADM and hundreds of farmers sued Syngenta last year to recover damages linked to the rejections, which began in late 2013.

    Syngenta's decision to sell a type of GMO corn seed called MIR 162, also known as Viptera, before obtaining import approval from China in December led to the rejections, U.S. farmers and exporters have said.

    Syngenta, the world's top crop chemical company, said it was not responsible for losses incurred by traders or farmers. But if anyone is responsible, it is the exporters that shipped GMO corn to China without approval, Syngenta said in its new lawsuit.

    ADM declined to comment on the lawsuit.

    "Syngenta's commercialization practices and conduct are responsible for the industry's damages," Cargill spokesman Mark Klein said on Friday.

    Syngenta said in the lawsuit that Cargill and ADM failed to keep MIR 162 corn separated from approved strains, even though they should have known the strain was not approved by China.

    "Cargill and ADM decided that it was in their economic interest to try to ship corn containing Viptera to China anyway" to profit from high corn prices, the lawsuit said.

    In January 2013, Syngenta told Cargill that China's approval for MIR 162 was not available yet, and Cargill thanked the seed maker for its "very clear" explanation, according to court documents.

    Cargill "nonetheless doubled down on its gamble" by entering into contracts from February to July 2013 to ship more than 2 million metric tons of corn to China, the lawsuit said.

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    Precious Metals

    Troubles in Dominican mine force Barrick to cut 2015 output forecast

    Barrick Gold, the world's largest bullion miner by total output, said Monday it is cutting its 2015 production forecast after a mechanical issue detected at its jointly owned Dominican Republic-based mine.

    The Canadian miner said it now expects to produce between 6 million and 6.15 million ounces of gold this year, which will result in reduced production until mid-January 2016. Its previous forecast was for between 6.1 million and 6.3 million ounces.

    The revised forecast came as  two of three electric motors at Pueblo Viejo's oxygen plant unexpectedly failed on Nov. 19. Barrick said they have been sent for repairs in the U.S.

    The Toronto-based gold producer owns 60% of the Dominican-based Pueblo Viejo mine. Fellow Canadian producer Goldcorp (TSE:G) (NYSE:GG) hold the remaining 40%.

    Commissioned in 2012, Pueblo Viejo mine achieved full production capacity milestone in 2014, and has significant reserves and resources with potential to expend the life of the mine.
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    Gemfields shares soar on ‘knock out’ auction results

    Shares in Gemfields shot up Monday morning as the precious stones miner reported “knock-out” results from its auction of predominantly lower quality rough emeralds at its recent auction in Jaipur, India.

    The stock traded as high as 44.35 pence or 5.6% higher in early morning as the London-listed miner, the world’s biggest emerald producer, said it had raised $19.2 million from the auction of the gems extracted by its Kagem Mining Ltd subsidiary in Zambia.

    29 companies placed bids in Gemfields' second auction of Kagem output, the first one held outside of Zambia since June 2012.

    A total of 29 companies placed bids in Gemfields' second auction of Kagem output, the first one held outside of Zambia since June 2012.

    The Jaipur event was also used to host a traded emerald auction of predominantly higher quality emeralds from Zambia and Brazil, which were obtained by the firm in the open market from various sources. The traded auction yielded additional gross revenue of $1.1 million with 20,400 carats sold.

    The figures, while important, are still a long way from the sparkling auctions where highly-polished gems usually fetch prices able to turn a company’s fortune around. Earlier this monthbillionaire Joseph Lau in Hong Kong paid $48.5 million for the Blue Moon weighing 12.03 carats. It was the most ever paid at auction for a gemstone.

    The emeralds and rubies miner’s next auction will take place next month in Singapore, and Gemfields anticipates it will be predominantly comprised of mixed lots of ruby and corundum from the Montepuez ruby deposit in Mozambique.
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    Europe Cracks Down On Bitcoin, Virtual Currencies To "Curb Terrorism Funding"

    In the past we have explained why when it comes to circumventing capital controls, primarily in the context of China, there are few as simple and as efficient alternatives to Bitcoin - contrary to what Bernanke may think, gold is concentrated money (and in India it now pays interest) but when it comes to transferring it across borders, it tends to be rather problematic. And now Europe appears to have figured this out, and as Reuters reports, European Union countries are preparing to crackdown on virtual currencies such as bitcoin, and anonymous payments made online and via pre-paid cards "in a bid to tackle terrorism financing after the Paris attacks, acording to a draft document."

    Just a week after the Paris terrorist attack, showing a dramatic ability for coordinated work by a continent that is known for anything but, today EU interior and justice ministers are gathering in Brussels for a crisis meeting called after the Paris carnage of last weekend. This happens days after theEuropean Commission already announced it would make procurement of weapons across Europe virtually impossible, if only for citizens who wish to obtain protection legally.

    According to Reuters, the justice minister will urge the European Commission, the EU executive arm, to propose measures to "strengthen controls of non-banking payment methods such as electronic/anonymous payments and virtual currencies and transfers of gold, precious metals, by pre-paid cards," draft conclusions of the meeting said.

    Conveniently, Reuters reminds us that "Bitcoin is the most common virtual currency and is used as a vehicle for moving money around the world quickly and anonymously via the web without the need for third-party verification. Electronic anonymous payments can be made also with pre-paid debit cards purchased in stores as gift cards."

    But no more: "EU ministers also plan "to curb more effectively the illicit trade in cultural goods," the draft document said."

    And with all of Europe sliding ever deeper into negative rates, and where a ban on cash bank notes is an all too realistic possibility, the easiest mechanism to evade the ECB's creeping financial oppression is about to be made illegal.

    Finally, there was no word about the true source of terrorism funding: those mysterious "third parties" which keep pumping the Islamic State with hundreds of millions in cash in exchange for its crude oil. Perhaps Europe is so unwilling to dig down into this most important question (which as we said last night nobody is willing to ask) because it either already knows the answer, or realizes that the people implicated just may be some of the wealthiest and most respected Europeans, and the resulting stench could spread all the way to the various unelected politicians and ex-Goldmanite central bankers?
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    Base Metals

    Tin market deficit as production drops 8%

    Along with the rest of the base metals complex tin enjoyed a nice bump on Thursday on speculation that Chinese miners are getting serious about production cuts and Beijing may start stockpiling metals to make the most of low prices.

    Tin gained nearly 2% to trade just under $15,000 on Thursday, recovering from a low of $14,200 a tonne hit earlier this week. The metal is still trading down more than 20% in 2015.

    The market is set for a 6,000 tonne deficit in 2015, despite a decline in demand from top consumer China, the International Tin Research Institute announced today.

    Platts News reports demand is expected to fall by 3% this year, and remain flat in 2016 at around 347,000 tonnes. The shortfall comes on the back of a steep in decline in primary production with world tin production likely to decline by around 8%. That will push the 2016 deficit to 10,000 tonne:

    "The tin market has been in deficit for eight out of the last 10 years and it appears likely that structural deficits will continue in the near future," said Peter Kettle, ITRI's markets manager.

    "Looking further ahead we see the possibility of a new growth spurt in tin use, most probably driven by existing and new applications linked to energy conservation and storage."
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    Rio Tinto to go ahead with $1.9 bln bauxite expansion

    Rio Tinto gave the go-ahead on Friday to expand its bauxite output in northern Australia with a $1.9 billion project, approving a major mine at a time when most miners worldwide are slashing spending.

    The Amrun project in Queensland state will initially produce 22.8 million tonnes of bauxite a year, replacing output from Rio's East Weipa mine, as the company aims to meet soaring demand from Chinese aluminium makers.

    With mining costs in the lowest quartile for bauxite mines worldwide, Rio said it planned to eventually expand production at Amrun, previously called South of Embley, to produce 50 million tonnes a year.

    "Amrun is one of the highest quality bauxite projects in the world," Chief Executive Sam Walsh said in a statement.

    "This long-life, low-cost, expandable asset offers a wide variety of development options and pathways over the coming decades," he said.

    Read more at Reuters
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    Newmont says firms eyeing Indonesian assets yet to meet 'sales criteria'

    Newmont Mining Corp said discussions with firms potentially interested in acquiring the US company's Indonesian assets have not met its "sales criteria". 

    The owner of Indonesia's largest listed oil and gas company, Medco Energi Internasional, Arifin Panigoro, was seeking government approval to acquire a 76% stake in Newmont's Indonesian unit, resources minister Rizal Ramli said on Wednesday. Panigoro, who was looking to diversify his investments amid declining oil prices, valued the stake at $2.2-billion, Ramli said. 

    A statement from Ramli's office said Panigoro also planned to develop a 500 000 tonne smelter as part of the plan. "Newmont receives expressions of interest in our assets from time to time, and consistent with our goal to improve our portfolio and balance sheet, we may consider proposals to acquire our assets," said Omar Jabara, the company's spokesman. "To date, no discussions related to our assets in Indonesia have met all of our sales criteria, which include fully committed funding representing fair value," he said, without naming any companies. 

    Newmont, Indonesia's largest copper miner after Freeport-McMoRan's local unit, is forecast by the Indonesian government to produce 500,000 tonnes of copper and gold concentrate this year from its Batu Hijau mine. 

    Medco Energi corporate secretary Imron Gazali said the company had just appointed a new board of directors and was unable to provide a comment on the matter. "The budget and work program for next year is still being discussed by the new board," Gazali said.
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    Goldcorp, Teck finish projects blend, create new $3.5 billion mine in Chile

    Canadian mining giants Goldcorp  and Teck Resources  have finished combining their respective El Morro and Relincho projects in Chile.

    The projects, located approximately 40 kilometres apart in Chile’s copper-rich Atacama region, are now part of a 50/50 joint venture momentarily named “Project Corridor,” the Vancouver-based miners said in a joint statement.

    The new copper-gold project, expected to help slash development costs as metal prices have dropped to multiyear lows, will require an initial investment of US$3.5 billion

    The new copper-gold project, expected to help slash development costs as metal prices have dropped to multiyear lows, will require an initial investment of US$3.5 billion, the companiessaid in August. The miners said the combined operation would provide much of the additional funding needed to construct future phases.

    Before joining El Morro and Relincho projects, their estimated costs were $3.9 billion and $4.5 billion respectively.

    On Tuesday, Goldcorp also announced that it had completed the transaction to acquire New Gold's 30% interest in the El Morro for $90 million in cash, along with a 4% gold stream payable on future gold production from the property.

    The two companies estimate that Corridor will have a 32-year lifespan and produce an average of 190,000 tonnes of copper and 315,000 ounces of gold a year, over the first decade.

    Both miners will work on a pre-feasibility study beginning in late 2016, which is expected to be completed by the end of 2017.
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    Glencore’s Zambia copper unit lays off 4 300 workers – sources

    Glencore’s Zambian unit has laid off 4 300 workers, union and company sources said on Tuesday, as the mining and trading company deepens cuts in copper output to support flagging prices.

    “The company started giving out the letters of redundancy yesterday and has continued with the exercise today,” one union official said, referring to Glencore unit Mopani Copper Mines.

    The union source said around 5 000 employees working for contractors would also lose their jobs as Mopani would only maintain two contractors specialised in the sinking of shafts.

    Mopani had said in a letter dated October 21 giving notice of redundancy to mine unions that the firm was still losing millions of dollars and had to take action to secure its long term viability.

    Mining companies are under Zambian law required to give labour unions at least one month’s notice before laying off employees.

    Zambia’s President Edgar Lungu said earlier this month he would not allow Glencore’s unit to lay off workers.

    Mopani was expected to pay the  4,300 workers a total of $33 million, two company sources with knowledge of the retrenchment plan told Reuters.

    Swiss-based Glencore has pledged to cut its net debt to $20 billion by the end of 2016 to regain the trust of investors after its shares tumbled to record lows this year.
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    Antofagasta may cut costs more if copper price stays low

    Chilean mining company Antofagasta will likely have to further cut costs if the price of copper does not recover within the next month, CEO Diego Hernandez said on Tuesday. Some cuts had already been made, said Hernandez, speaking on the sidelines of a mining forum in Santiago. 

    The price of copper, which is Chile's top export, hit its lowest in more than six years on Monday as a firmer dollar compounded pressure from ebbing demand from key buyer China. It recovered slightly on Tuesday to trade at around $4 597 a tonne. "It is still very premature to know if the price is going to stabilize at these lower levels, or if it will rebound," Hernandez told journalists. "But effectively, if the price stays like this for the next 30 days probably we will have to do a new revision (to costs)." 

    The trough in the copper price was already a "crisis," he said, adding that there was still much uncertainty about a recovery, given the signs that China was entering a new phase of weaker demand growth. London-listed Antofagasta cut its 2015 copper output forecast for the third time last month, and said it was reducing its workforce by about 7%. The head of its operational division told Reuters on Nov. 20 it would try to reduce costs next year, but that lower ore grades limited its room to maneuver.
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    Alcoa to get aid from NY state to keep aluminium smelter open

    Alcoa Inc will receive almost $70 million in aid over 3-1/2 years from New York state to keep the Massena West, New York, aluminium smelter open, under a deal announced on Tuesday.

    The smelter had been slated for curtailment.

    The state's power authority will provide $30 million in power assistance, and the Empire State Development Corporation will provide $38.8 million in capital and operating expenses to modernize the plant, Governor Andrew Cuomo said at a news conference at the plant.

    The plant will keep operating at full capacity of 130,000 tonnes per year, an Alcoa spokeswoman confirmed. The deal will save around 600 jobs, and New York state may penalize Alcoa if the number of employees at the plant falls below that before March 2019, Cuomo said.

    Three weeks ago Alcoa announced plans to curtail the Massena plant along with two smelters in Washington state, leaving it with just one operating smelter in the United States. Depressed aluminium prices prompted the decision, with London Metal Exchange (LME)aluminium near 6-1/2 year lows.

    "We understand the price of aluminium is down. We get it, and we want to help," Cuomo said, adding that when he heard the "traumatic" news of the planned curtailment the state "really scrambled" to reach a deal to keep the plant open.

    News of those plans prompted a modest rise in the Midwest premium paid on top of the LME price for physical delivery AL-PREM. This announcement could limit those gains somewhat in the near-term, said Edward Meir, senior metals analyst at INTL FCStone.

    "It's better to have the units than not to have the units," Meir said. "It doesn't change the underlying premise: smelters are finding it increasingly uneconomic to produce in the West."

    Both Alcoa Washington state plants slated for curtailment by the end of the first quarter of 2016 - 279,000 tonne-per-year Intalco and 184,000 tonne-per-year Wenatchee - produce substantially more primary aluminum than Massena.

    In addition, the Midwest premium still has more room to rise as rising U.S. demand, particularly in the auto sector, will necessitate more imports from the Middle East, where primary output is growing, Meir said, noting that those imports involve higher costs of shipping.

    Read more at Reuters
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    Billionaire activist Paul Singer has taken a big stake in Alcoa

    Elliott Management, the $27 billion hedge fund let by Paul Singer, has taken a large stake in aluminum maker Alcoa.

    According to CNBC's David Faber, Elliott now holds a 6.5% stake in the company.

    The stock was last trading up 2.9% at $8.96 per share.

    In late September, Alcoa said that it would split itself into two separate publicly traded companies— Upstream Company and Value-Add Company.
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    Copper Capacity Growth

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    Newmont's Indonesian copper exports to restart

    Newmont Mining Corp were barred from exporting copper and gold concentrate from its operations in Indonesia in September, but the company is now free to resume exports again.

    The export licence forDenver-based  Newmont's local unit, PT Newmont Nusa Tenggara, was suspended because the company failed to meet government stipulations for developing a domestic smelter, but according to a report in the Jakarta Post a licence will be granted for six months following commitments from Newmont to partner with Freeport-McMoRan (NYSE:FCX), to build a facility.

    Newmont Nusa Tenggara has made "an early commitment of US$3 million to support the smelter development” according to the Asian nation's mines minister.  The smelter being built by Freeport in East Java is expected to cost $2.3 billion.

    Exports from the Batu Hijau copper and gold mine in Sumbawa Island and from Freeport's Grasberg mine in Papua province were halted for nearly nine months last year when a new rule took effect banning the export of unrefined minerals and punitive export taxes were levied.

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    China Signals Curbs on Aluminium Output in Accord With Russia?

    China signalled it's prepared to curb aluminium production to try to stem oversupply as part of an agreement with Russia.

    The Sino-Russian protocol on energy cooperation, signed Nov. 16 by Russian Deputy Prime Minister Arkady Dvorkovich and Chinese Vice Premier Zhang Gaoli, includes a section on bringing aluminum output into line with demand, according to a copy of the document obtained by Bloomberg News. It also supports tie-ups between Russia's United Co. Rusal and Aluminium Corp. of China Ltd., or Chalco, on developing mining and new alloys, the document shows.

    "China is finally ready to review its policy in aluminium and help to stabilize the market after the price declined to the level where all of its aluminium producers are working below break-even," Rusal's Deputy Chief Executive Officer Oleg Mukhamedshin said in a phone interview from Moscow. It's "mega news for the industry," he said.

    A flood of aluminium exports from China has depressed international markets this year, sending prices to the lowest since 2009 and forcing smelters around the world to reduce production. Rusal may move forward in December with plans to cut its output by 200,000 metric tons while its Kubal smelter in Sweden may be idled, the company said this week.

    The protocol between the two governments includes a "recommendation for optimization of aluminium production in line with demand by Chinese and Russian aluminium industries in order to avoid inefficient use of energy resources," Mukhamedshin said.

    The Chinese State Council Information Office didn't immediately reply to requests for comment. Aliya Samigullina, a spokeswoman for Dvorkovich, confirmed the signing of the protocol and referred to a Nov. 16 government statement on the meeting with China that said the parties welcomed talks to develop aluminium projects.

    Russia may offer to build new domestic smelting capacity to supply China as its production is cleaner and more commercially viable than that of the Asian country, Mukhamedshin said.

    "That won't happen now, only in at least three years, when the market will be stabilized and the oversupply issue solved," he said. Rusal and Chalco are working on developing new alloys, which may be sold to China, and they may consider joint projects in bauxite and alumina, Mukhamedshin said.

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    Copper Slumps Below $4,500, Nickel Plunges as Metals Slide

    Copper fell below $4,500 for the first time since May 2009 as investors fear China’s shift to a consumer-driven economy from investment-led expansion will slow demand in the world’s biggest user. Nickel lost more than 5 percent to the lowest since 2003 and Shanghai futures fell the daily limit. Glencore Plc shares slid 4.1 percent and BHP Billiton Ltd. dropped 3.1 percent.

    Copper used in power grids and home wiring declined as much as 2.6 percent to $4,461.5 a metric ton before trading at $4,468 by 12:10 p.m. in Shanghai. Nickel fell to $8,235 a ton, while zinc erased the advance posted on Friday after Chinese smelters announced they planned to cut production next year.

    “Demand is still the key for commodities at the moment, and supply discipline and production cuts are uncertain,” said Helen Lau, an analyst at Argonaut Securities in Hong Kong. “There’s a chance that local producers will continue to ramp up production and replace the cuts that have been made. Everyone still wants to maintain cash flow at these prices.”

    Commodities extended their decline, with oil and industrial metals retreating with gold as the dollar cemented gains. The outlook at a conference last week in Shanghai was bearish amid the Chinese slowdown, while top producers are reluctant to reduce output further. Expectations that the Federal Reserve will soon raise U.S. interest rates are boosting the dollar, making commodities more expensive for buyers in other currencies.

    “Investors are shorting metals because they are bearish on the Chinese economy,” Xiao Jing, a senior analyst at Beijing Capital Futures Co., said by phone. “Metals premiums in China’s physical market didn’t rally after prices plunged, indicating very weak demand. Prices won’t rebound until late December, when the Fed makes its final decision.”

    The London Metal Exchange index of six industrial metals has plummeted 27 percent this year, the worst annual performance since the global financial crisis in 2008.
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    Glencore's cuts come back to bite zinc bears

    The London zinc price touched a fresh six-year low of $1,497.50 per tonne on Thursday.

    Last month's flurry of excitement after Glencore's announcement of 500,000 tonnes of mine cuts had, it seemed, completely dissipated.

    But those cuts were carefully calibrated to get maximum impact out of the supply chain and the tremors are starting to be felt, judging by this morning's announcement of major production cuts by Chinese zinc smelters.

    And it's caught the many bears in this market on the hop. The London Metal Exchange (LME) three-month price has surged to a current $1,602 per tonne.

    Zinc, like copper, has been coming under sustained bear attack from China, where Shanghai Futures Exchange (SHFE) volumes and open interest have been surging even as the price has been sliding.

    Investment money elsewhere has followed suit. LME broker Marex Spectron estimates the collective speculative short on LME zinc is around 38 percent of open interest. That's the highest it's been since June 2012 and funds are more bearish on zinc than on any other metal.

    The irony is that the bears are attacking zinc just when there is finally some tangible sign of tightness creeping into the raw materials market. Tightness that is evidently starting to worry Chinese smelters.

    Such a development has been something of a holy grail for zinc bulls in recent years, much talked about but always elusive.

    One of the stand-out current features of industrial metals trading is the build in short positions on the SHFE. It's happening in copper. It's happening in aluminium. And its happening in zinc.

    Both Shanghai zinc market open interest and volumes have soared in recent weeks and are now at their highest since the tail-end of 2014. Given that prices have simultaneously been falling, the implication is a massive build of short positions.

    There's been much head-scratching as to what exactly is going on in Shanghai. Is it a return of the long equities/short metals trade that was in vogue earlier this year? If so, it's come back bigger and bolder than before.

    Or is it just a collective negative assessment of China's metallic prospects over the coming period with zinc picked out as being particularly vulnerable to further slowdown?

    Certainly, the mood at last month's China International Lead and Zinc conference in Xi'an was apparently gloomy, with delegates fretting about poor demand and high stocks, both of refined metal and concentrates.

    Stocks of refined zinc are undoubtedly high both in China and the rest of the world. Look no further than New Orleans, where the zinc carousel is still turning.

    LME warehouses received almost 240,000 tonnes of zinc over the course of August and September. So far this month almost 63,000 tonnes have been cancelled and are awaiting load-out.

    The inference is that behind this visible shuffling of metal, a combination of spread and storage arbitrage, lies a bigger inventory mountain in the off-market shadows.

    And as for concentrates, four years of rising benchmark treatment charges, the best indicator of raw materials availability, suggest four consecutive years of surplus, upon which smelters, particularly Chinese smelters, have feasted.

    According to Chris Parker, zinc research director at Wood Mackenzie, "spot treatment charges for concentrate imported into China in November 2015 fell in the range $185-190 per tonne." The research house's indicative treatment charge for this month is $190, basis delivery at major Chinese ports.

    "This is a reduction of $20 per tonne from the peak of $210 in May-June 2015 and the lowest since $185 in September 2014," Parker noted.

    By way of comparison, this year's benchmark terms were set at $245 per tonne.

    Sliding treatment charges point to a tightening of availability and suggest downwards pressure on next year's benchmark terms.

    Read more at Reuters
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    Steel, Iron Ore and Coal

    Arsenic and mercury found in river days after Brazil dam burst

    Illegal levels of arsenic and mercury polluted the Rio Doce river in the days after a dam burst at an iron ore mine in early November in Brazil's worst-ever environmental disaster, according to tests by a state water agency.

    The Institute for Water Management in Minas Gerais (IGAM), found arsenic levels more than ten times above the legal limit in one place along the Rio Doce after the dam burst on Nov. 5, killing at least 13 people and flooding thick mud across two states. Mercury slightly above the permitted level was also found in one area.

    In total, IGAM found unacceptable levels of arsenic on one or more days between Nov. 7 and Nov. 12 at seven places on the Rio Doce, which stretches over 800 km (500 miles) from the mineral-rich state of Minas Gerais to Espirito Santo on the Atlantic coast.

    The report, dated Nov. 17 but only released on IGAM's website on Tuesday after pressure from prosecutors, appears to contradict claims by the companies responsible for the mine.

    Samarco, the mine operator, and its co-owners, BHP Billiton PLC and Vale SA, have repeatedly said the water and mineral waste unleashed by the dam burst are not toxic.

    Samarco said in a statement on Thursday that their own tests showed the mine waste in the dam, known as tailings, did not pose any harm to humans.

    On Wednesday, the United Nations human rights agency said "new evidence" showed the mud "contained high levels of toxic heavy metals and other chemicals," without specifying what the chemicals were or where the evidence came from.

    Leonardo Castro Maia, a prosecutor in the city of Governador Valadares, which had its water supply cut off by the mud, told Reuters he had been pushing IGAM to publish its findings on its website. After a delay, he said the agency had complied.

    "There's been a real lack of communication between the bodies testing the water and the wider population. The distribution of information needs to be improved," Maia said.

    Tommasi Laboratorio, a company hired by Espirito Santo's environmental agency to do tests on the water, said it had also found arsenic above legal levels but quantities had fallen in recent days.

    "It's arsenic that wasn't there before the dam burst," said lab owner Bruno Tommasi. He said his tests had found no mercury or uranium and also urged caution about how to interpret the arsenic results.

    "Different types of arsenic cause varying levels of harm and our tests did not specify what type of arsenic was in the water," he said.

    Biologists working along the river and coastline have been shocked by the impact of the burst dam.

    The mud has killed thousands of fish, but BHP said they most likely choked to death on the sheer volume of sediment released by the dam, rather than the chemical composition of the sludge.

    Read more at Reuters
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    Indonesia's Nov HBA thermal coal price hit a new low

    Indonesia's November thermal coal reference price, also known as Harga Batubara Acuan (HBA), was set at $54.43/t FOB, the lowest ever recorded since its inception in January 2009, said the Ministry of Energy and Mineral Resources on November 12.

    The November HBA price represents a drop of 5.15% from October and down 17.15% from the same period last year.

    The weakening price is expected to continue until the end of the year, said Adhi Wibowo, director of Development and Utilization of Coal Ministry of Energy and Mineral Resources on November 24, but he was not sure how much the closing price of coal this year.

    Adhi explain the fall in coal prices this November because global demand has declined again.

    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. “All index has decreased,” he said.

    The index today does not reflect the price of domestic coal because most describe high calorie coal prices. Though Indonesia is the biggest producer of low-grade coal. Therefore, Ministry of Energy and Mineral Resources continues to create new Indonesian Coal Price Reference (ICPR) formula and expected to be completed in December 2015.
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    Chinese HBIS Tanshan Group plans 3 million tonnes steel plant in Oyo state in Nigeria

    CAJ News reported that Chinese company, HBIS Tanshan Group, has proposed the establishment of a 3 million tonne steel plant in Oyo State in Nigeria.

    The group disclosed this at a meeting with the state government officials, represented by the State Deputy Governor, Moses Alake-Adeyemo, and other top government officials were also present. One of the directors, Zhao Lishu, and the current Special Adviser to the Minister for Steel in China, Gu Lin, led the Chinese delegation.

    The HBIS delegation from China was led by Alake-Adeyemo assured the company the state was one of the largest in Nigeria with the largest land mass. Oyo is the 14th largest of the 36 states.

    He said proposed partnership with the HBIS group was a strategic one. He said “We cannot quantify the merits of this proposed partnership between HBIS and Oyo state. This partnership will definitely increase Oyo state’s IGR, employment, investment etc. Oyo state is prepared to partner with HBIS in establishing the 3 Million MT Steel Plant. For any country to develop, iron and still will be core to their development.”

    The Chinese HBIS Group Han-Steel was established in 1958. It has developed into one important high-quality plate and strip production base in China after over half a century of hard work and has comprehensively possessed an annual steel production capacity of 10 million tonnes.

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    Western German steelworkers to get 2.3 pct pay increase

    Steelworkers in the western German state of North Rhine-Westphalia will receive a pay rise of 2.3 percent next year, despite tough conditions in the industry, union IG Metall said on Thursday.

    The talks on a pay deal for 75,000 workers lasted 11 hours and an agreement was reached in the early hours of Thursday morning, said the union, which had initially called for a pay increase of 5 percent.

    "Despite difficult conditions in the steel industry, our workers will not miss out on the overall positive economic climate," Knut Giesler, IG Metall negotiator said in a statement.

    The steel industry has been severely hit by a global crisis in the sector that is fast rising up the political agenda in Europe, where many steelmakers lay much of the blame for their predicament on record steel exports from China.

    ArcelorMittal, the world's largest steel producer, cut its full-year profit forecast this month and in Britain, weak steel prices have led to heavy job losses and the liquidation of the country's second-largest steelmaker.

    IG Metall said it and employers had agreed to discuss how to secure jobs in the industry with politicians.

    "Secure jobs and fair wages in the steel industry require fair competition. Politicians in European must contribute to that," Giesler said.

    The new pay deal runs until the end of February 2017 and also includes a one-off payment of 200 euros ($212.40) for November and December 2015.

    Read more at Reuters
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    Mud from Brazil dam disaster is toxic, UN says, despite mine operator denials

    Mud from a dam that burst at an iron ore mine in Brazil earlier this month, killing 12 people and polluting an important river, is toxic, the United Nations’ human rights agency has said.

    The statement contradicts claims by Samarco, the mine operator at the site of the rupture, that the water and mineral waste contained by the dam are not toxic.

    Citing “new evidence”, the UN’s office of the high commissioner for human rights said in a statement the residue “contained high levels of toxic heavy metals and other toxic chemicals”.

    The agency did not identify the studies that were the basis for the evidence or say who conducted them.

    Samarco, which is jointly owned by the Anglo-Australian companyBHP Billiton and Brazil’s Vale, said it was taking every measure possible to provide emergency assistance to those affected by the dam break and to reduce the social and economic impacts of the disaster.

    Samarco said in a statement that both pre- and post-disaster tests show the mud released in the dam burst, a mixture of water, iron oxides and silica or quartz known as tailings, presented no danger to human health and did not contain water contaminants.

    While iron and manganese levels in the mud are above normal, Samarco said, they were below dangerous levels.

    BHP Billiton said on Thursday that the waste was chemically stable and would not change its composition in water.

    Biologists have been shocked by the impact of the burst dam, which Brazil’s government has called the country’s worst-ever environmental disaster.

    The mud has killed thousands of fish as it flows through the Rio Doce, the river which connects the mineral-rich state of Minas Gerais with Espirito Santo on the Atlantic coast.

    The 60 million cubic meters of mine waste, equivalent to 25,000 Olympic swimming pools, cut off drinking water for a quarter of a million people. The dense orange sediment has now reached the ocean.

    The UN statement criticized the response of the companies and the Brazilian government as “insufficient,” saying: “The government and companies should be doing everything within their power to prevent further harm.”

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    China key steel mills daily output up 2.8pct in early-Nov

    China's key steel mills saw their average daily crude steel output post a 2.84% ten-day rise to 1.69 million tonnes in early November, according to the latest data from the China Iron and Steel Association (CISA).

    The increase was mainly due to the slightly improved profitability of steel mills amid falling iron ore and billet prices as well as the production resumption after the steel mills’ routine maintenance.

    Stocks in key steel mills stood at 15.03 million tonnes by November 10, up 1.51% from October 31 and up 1 % from the month before.

    As of November 13, social stocks of steel products across the country fell 3.49% from end-October to 9.3 million tonnes, a drop of 38.9% from the peak this year, signaling a continuous low expectation in steel market.

    In addition, key steel mills’ daily output of pig iron reached 1.66 million tonnes during the same period, up 2.47% from the past ten days.

    Domestic prices of six major steel products all witnessed ten-day declines in mid-November, with rebar price averaging 1,976.4 yuan/t, down 2.1% from ten days ago, showed data from the National Bureau of Statistics (NBS).

    That compared with a slight rebound of 0.1% in early-November.

    It was mainly impacted by further shrinking demand amid persisting sleety and foggy weather in northern China, which drove more steel mills with outdated capacity to withdraw from the market.

    In mid-November, Tangshan Songting Iron & Steel Co., Ltd. declared to stop production, involving annual capacity of 5 million tonnes. So far, Tangshan has seen as much as 14.97 million tonnes capacity withdrew from the market.

    Crude steel output may still maintain the decline trend in late November, given the slack demand and unfavorable weather, analysts said.

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    Vale to slash iron ore output target, but opening world’s largest mine in 2016

    S11D, also known as Serra Sul, will expansion Vale’s mining activity in the Carajás Mountains of Northern Brazil, adding 90 million tonnes to the miner's annual capacity. (Image courtesy of Vale SA)

    Brazil’s Vale (NYSE:VALE), the world's biggest iron ore producer, is likely to slash its iron ore output target for the year even further than what it has already hinted following the Samarco disaster, according to BTG Pactual, the largest independent investment bank in Latin America.

    In a note to investor Wednesday, the bank said the miner would target a 355 million tonnes output for 2015, significantly less than the 376 million tonnes the company had previously forecast, Noticias de Mineracao reports (in Portuguese).

    Earlier this month the miner had warned that the deadly collapse of a tailings dam at Samarco, the iron ore company it owns 50-50 with BHP Billiton, would impact production at two nearby mines. Vale's Fabrica Nova and Timbopeba mines output, said the company in a statement, would be reduced by 3 million tonnes in 2015 and by 9 million tonnes in 2016.

    The Rio de Janeiro-based company has announced that S11D, the world’s largest iron ore project, is 60% completed

    The miner, battling to increase margins, will soon have a new major source of iron ore output as the Rio de Janeiro-based company has announced that S11D, the world’s largest iron ore project, is 60% completed, SteelOrbisreports.

    The company expects the venture, which includes a mine, plant, and railway and port logistics, to start production in the second half of 2016.

    S11D, also known as Serra Sul, is part of Vale's massive Carajás complex and will add another 90 million tonnes to the miner's capacity, pushing it over 400 million tonnes per year. Last month the company announced record third quarter shipments of 88 million tonnes despite idling 13 million tonnes worth of high cost operations.

    The miner has been able to reduce cash costs to just $12.70 per tonne (it's in the high teens at Rio Tinto and BHP) and that S11D could push costs below $10 a tonne, thanks largely to the weak real which is down more than a third in value against the US currency over the past year.

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    Why a lower iron ore price is good for BHP and Rio

    While equity markets are pre-occupied with what is, in the longer term, ultimately a trivial question of whether or not BHP Billiton and Rio Tinto can maintain their dividends in the face of commodity prices that are in a fresh tail-spin, the real issue is what the renewed bout of low-price pressure means for second and third-tier players.

    The iron ore spot price fell again yesterday, to $US43.89 a tonne, its lowest level in about six years, prompting more fears of an industry apocalypse (even though the average price for the three decades to 2007, before the financial crisis and China’s massive stimulus program, was about $US32 a tonne).

    The source of the collapse in iron ore prices, as it is for much of the depressed nature of commodity prices more generally, is the weakening of China’s demand for the raw materials of its industrialisation as a combination of a shift in its economic strategies and the loss-making over-production generated by its previous strategies coincide.

    The impact on iron ore, the commodity of arguably the most significance to Australia, is being leveraged by the still-growing production of the commodity even as demand is shrinking.

    BHP and Rio are the companies most obviously, or at least most visibly, affected because of their status as two of the three big seaborne iron ore producers; a position exacerbated for BHP in particular by the debate about its progressive dividend policy and its sustainability.

    The ultimate reality for both companies is that their dividends are discretionary. BHP has made it clear, and Rio has said similar things (albeit under less pressure), that its dividend policy is flexible and can be ditched under pressure. Its balance sheet and credit rating are the priority.

    That gives BHP, and Rio, a lot of flexibility to respond to big adverse shifts in the direction of their cash flows.

    Both have very high-quality balance sheets and both are at the low end of the cost curve and at the upper end of the quality curve in almost everything they produce. In the case of iron ore, they are the low-cost producers.

    In some respects, while it will cause them some pain (in the form of lower earnings and cash flows and potentially an even greater backlash from investors if they abandon their dividend policies) BHP and Rio might not mind the latest break in already-depressed commodity prices, particularly iron ore.

    There are a lot of higher-cost producers across the suite of commodities, but particularly in iron ore, that have kept producing despite prices that have tumbled below their overall costs.

    Positive operating cash flows and the costs of closure have kept a lot of uneconomic and sub-economic production in the market even as a lot more new low-cost volume has kept entering it.

    A big fall in prices, sustained for six months to a year, might not be good news for the BHPs and Rios in the short term but would bring forward the much-needed rebalancing of supply and demand in the longer term.

    Higher-cost producers with weak balance sheets won’t survive if commodity prices stay where they are or fall further -- which they will unless those weaker producers disappear.

    The iron ore market illustrates the wider picture.

    A price below $US40 a tonne isn’t inconceivable – it would represent a return to the long-term trends that long-established producers like Rio and BHP used to predicate their investment on. At those levels, only Rio and BHP would generate meaningful profits – but those profits would still be high-margin and would still be very meaningful.

    That’s why it would be in their interests for the price to fall, in the short term, to whatever level is necessary to drive out excess and higher-cost supply and re-balance the market.
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    China's coal output continues to drop

    Coal output in China, the world's largest coal producer, continued to decline in the first ten months of 2015, as the impact of clean air and renewable energy policies began to weigh on the industry, official data showed on Tuesday.

    China's coal production fell 3.6 percent year on year to 3.05 billion tonnes in the first ten months, according to figures from the National Development and Reform Commission (NDRC).

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    China’s Oct coking coal imports at 3.08 mln T down 43.4% on year

    China’s coking coal imports fell 43.4% year on year and down 22.2% from September to 3.08 million tonnes in October – the third straight monthly and the second consecutive yearly drop, showed the latest data from the General Administration of Customs (GAC).

    Imports from top supplier Australia dropped 47.9% from the previous year and down 24.4% from a month ago to 1.63 million tonnes in October – the fourth consecutive month-on-month fall.

    Buying interests of Australian materials were negatively impacted by the cancelation of Australian import tariff from January 1, 2016, which may cut CIF cost by 10-20 yuan/t.

    Coking coal imports from Mongolia – China’s second largest supplier – fell 19.5% on month and down 40.4% on year to 0.69 million tonnes during the same month.

    Canada exported 0.51 million tonnes of coking coal to China in October, down 30.7% on month and down 7.5% on year.

    Over January-October, China’s coking coal imports fell 20.8% on year to 39.48 million tonnes.

    Top supplier Australia exported a total 21.23 million tonnes of coking coal to China during the same period, down 11.8% year on year.

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    China Oct thermal coal imports down 26.5pct on year

    China’s imports of thermal coal—including bituminous, sub-bituminous coals and lignite -- plunged 26.5% year on year and down 20.6% on month to 9.18 million tonnes in October this year, according to the latest data released by the General Administration of Customs.

    Of this, imports from Australia fell 49.3% on year and down 35.7% on month to 2.45 million tonnes.

    Imports from Indonesia rose 2.8% on year but decreased 16.8% on month to 5.69 million tonnes.

    China’s didn’t import thermal coal from Russia during the same month.

    Lignite imports in October were 3.61 million tonnes, down 9.2% from the year prior and down 22.09% from the month before.

    China’s thermal coal imports over January-October amounted to 110.11 million tonnes, falling 34.2% from a year ago.

    Lignite imports during the same period were 40.94 million tonnes, down 24.5% from the year prior, with imports from top supplier Indonesia at 38.7 million tonnes, down 23.3% year on year.

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    Indian steel majors call for floor price mechanism to thwart cheap imports

    ET reported that a delegation of Indian steel majors comprising of SAIL, JSW, Tata Steel, Bhushan Steel, RINL and Essar etc met commerce and industry minister Ms Niramala Sitharaman on Tuesday to discuss issues arising out of dumping of steel by China, Japan and Korea and sought more measures to counter the flood of steel products.

    The delegation wants the government to fix a floor price for steel imports as it alleged that domestic steel firms had no relief despite the government imposing safeguard duties in September, anti-dumping duty in June and raising import duty in August.

    The delegation said that China reduced steel prices by 40%, after India imposed a 20% safeguards duty on some imported steel products in September

    Citing the steel sector's outstanding debt at INR 600,000 crore, members of the delegation said the sector's previous quarter losses amounted to INR 4,000 crore.

    A commerce mintsry official said “However, the minister has asked these companies to substantiate the need for more support by data and asked them to work towards making the sector more competitive.”

    He added that Ms Sitharaman told the delegation that the interest of the user industry has also to be balanced. He said that the government has not given any immediate assurances to the steel companies due to lack of data.
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    No reprieve: iron ore glut defies Samarco dam disaster

    Premiums for iron ore pellets - the highest-quality steelmaking raw material - have sunk this month despite the loss of a fifth of global supplies after a Brazil mine disaster, underscoring the industry's deep glut.

    Even a permanent closure at the flood-hit Samarco mine would be unlikely to boost pellet premiums, analysts and traders said, with other miners able to boost supply and Chinese steel mills eager to cut costs by using cheaper ore.

    "It's probably the least sensitive time for a supply issue," said Mark Pervan, global head of commodity research at ANZ.

    Iron ore prices .IO62-CNI=SI have tumbled nearly 40 percent this year, hitting a decade low at $43.40 a tonne on Tuesday on oversupply and falling Chinese steel demand.

    The premium that steel mills pay for pellets has also been falling, and has continued to slide since a tailings dam owned by Samarco burst on Nov. 5, unleashing 40 million cubic meters of mud on the valley below and killing 11 people with 12 still missing.

    Samarco, jointly owned by BHP Billiton and Vale SA, produces between 25-30 million tonnes a year of iron ore, mainly pellets, selling to China, Europe, the Middle East and Japan.

    The premium for iron ore pellet for delivery to China fell to $12.25 per dry metric tonne as of Nov. 18, continuing a steep decline from early October when it stood at $19.30, according to pricing agency Platts.

    Voluntary output cuts in other industrial commodities have had little impact. A pledge by major Chinese zinc smelters to slash nearly 20 percent of total production next year had a short-lived boost to prices that are still near multi-year lows.


    "If there was ever an excuse for prices to rise it would have been now, but things are that bad that the market brushes this news aside," said a London-based trader on the Samarco disruption.

    Pellets, processed ore that can be fed directly to a blast furnace, are a high-end product and make up only a tiny proportion of the seaborne iron ore trade. China imported 19 million tonnes last year, or 2 percent of its total purchases, according to commodity consultancy CRU.

    Widening losses among Chinese steel mills has prompted them to look to cheaper ore, cutting costs despite reduced productivity, said a Singapore trader.

    "Mills that are under long-term contracts with Samarco will be quite happy to see Samarco stop supplying," said a Shanghai-based trader.

    Outside China, Japan's biggest steelmaker, Nippon Steel and Sumitomo Metal Corp, has secured alternative suppliers, a spokesman said, but declined to give details. Japan's second-ranked JFE Steel declined to disclose backup plans.

    Vale could ramp up pellet production from other mines to fill any gap arising from Samarco, while other suppliers such as Russia's Metalloinvest and Bahrain Steel could bridge any shortfall, said Mitchell Hugers, analyst at BMI Research.

    Read more at Reuters

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    Missing climate goals, Dutch mull closing coal plants

    With the Netherlands on track to miss its climate goals for 2020, the Dutch government is coming under pressure to order the closure of the nation's coal plants.

    A group of 64 climate scientists on Monday called for the shuttering of all 11 plants, including three that came online this year and cost 5.5 billion euros ($5.85 billion).

    Dutch coal use is at a record high in 2015 and it supplies up to a third of the country's electricity needs.

    "It's high time the Netherlands finally sends a clear signal on sustainability," the scientists wrote in an open letter. "It will put an end to the paradox that one of the countries that has the most to lose from climate change is doing the least about it."

    Two-thirds of the country's 17 million population lives below sea level and would be vulnerable to rising sea levels in a warming world.

    The new coal plants were built during a period of economic stagnation as the government slashed subsidies for renewable energy and looked to cheap sources, including relatively efficient coal plants and plants powered by gas from the Groningen field, Europe's largest.

    Parliament is due to debate with Prime Minister Mark Rutte strategy for the U.N. climate summit that starts in Paris on Monday and a majority is now backing the scientists' call.

    Rutte's conservative VVD Party opposes the idea while its junior coalition partner Labour has endorsed it.

    Just 5.6 percent of Dutch energy came from renewable sources in 2014, according to an annual energy review published in October, and the country will miss a "binding" 2020 target of 14 percent.

    The Netherlands' target was set below the European Union-wide renewables target for 2020 of 20 percent, a concession granted due to the relatively large Dutch industrial base, centred around the port of Rotterdam. Neighbouring Germany, with a similar profile, reached 30 percent from renewables in 2014.

    In June, a court found the Dutch government had also fallen behind on its goals under the Kyoto protocol on CO2 emissions and ordered it to cut output by 25 percent from 1990 levels by 2020 -- a more ambitious target than the 17 percent Rutte's government had been following.

    Read more at Reuters

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    ArcelorMittal South Africa prices cash call at big premium

    ArcelorMittal’s South African unit priced its fully-underwritten R4.5 billion ($320 million) equity cash call at more than a 50% premium on Tuesday, sending its shares soaring.

    The unit of the world’s largest steel maker will sell nearly 700 million new shares at R6.50 each, a 56 premium to ArcelorMittal South Africa’s closing price on Monday.

    Shares in ArcelorMittal jumped 40% to R5.84 shortly after the announcement.
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    Australia urges China to speed up standard test on coal imports

    Australia has urged China's leadership to speed up the environmental testing of coal imports amid concerns from Australian exporters that the new standards were acting as a barrier to trade, sources reported, citing talks between Prime Minister Malcolm Turnbull and Chinese Premier Li Keqiang on the sidelines of the East Asia Summit.

    China has imposed new standards on the coal it uses for power generation to try to cut emissions of sulphur dioxide, nitrogen oxides, particulate matter and mercury, and reduce the nation's chronic and severe air pollution.

    "China has imposed – and we respect their doing so – strong environmental limits, regulations on coal, principally directed at reducing the level of sulphur in the coal that they burn to counter pollution," Mr. Turnbull said.

    Mr. Turnbull went in to bat for Australian coal, pointing out its high quality and stressing Australia wanted to avoid "delays" in the annual $9 billion in coal exports to China caused by the new testing regime.

    "Australian coal generally has very low sulphur, so there's no bad news in that for Australian coal exporters.

    During the talks, Li assured the Prime Minister that China's economy would continue to grow at "about 7%" and that there would be an ongoing demand for Australia's resources, including coal, even as his economy became more consumption driven.

    "There have, however, been some administrative difficulties in a way that the testing has been managed and the Premier Li Keqiang and I had a very good discussion about that and how we may be able to expedite the testing so that Australian coal exporters and, indeed, Chinese importers of Australian coal, will not be inconvenienced or have their activities disrupted."

    Mr. Li accepted these concerns when he "acknowledged the high quality" of Australian coal, officials said, and gave a commitment towards "streamlining" the testing process.

    Both Mr. Turnbull and Mr. Li also assured each other that their respective domestic processes were in train to ratify the China-Australia Free Trade Agreement and have it in force before Christmas.
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    Indonesia to miss coal production target this year

    According to officials at the Energy and Mineral Resources Ministry, Indonesia's coal miners are cutting production by 20 percent this year, battered by persistently weak prices for the fossil fuel around the world.

    Mr Bambang Gatot, the ministry's director general of minerals and coal, said that "It doesn't seem like we will achieve the target of 425 million metric tons of production this year. As long as commodity prices are still low, production will be under pressure."

    The government's benchmark price of coal has fallen nearly 15 percent since the start of the year to USD 54.42 per ton, marking the biggest decline since 2009.

    Mr Adhi Wibowo, the ministry's director of coal business development, said that the drop in demand was mostly seen in orders from overseas, with local demand for the commodity holding steady.

    Neither official would identify the companies that had opted to cut production.

    According to ministry data, coal production in Indonesia reached 322.5 million tons between January and October this year, down 13 percent from the same period last year.
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    Forex hit pushes Russian pipe producer TMK to net loss in Q3

    TMK, Russia's largest maker of steel pipes for the oil and gas industry, said on Tuesday it made a net loss of $74 million in the third quarter due to a $94 million hit from adverse foreign exchange rate moves.

    Financial results of TMK, controlled by businessman Dmitry Pumpyansky, have been dented in dollar-terms by the rouble weakening and lower pipe sales in the United States.

    For 2015 as a whole, TMK said it expected a decrease in overall pipe sales, revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA).

    Its third-quarter revenue was down 21 percent quarter-on-quarter to $917 million, with EBITDA down 27 percent to $125 million. Net debt fell by $238 million from the end of June to $2.6 billion at the end of September.

    For the final quarter of 2015, however, the company expects stronger financial results compared with the third quarter, partially due to seasonally higher demand for OCTG - pipes for the oil and gas industry in Russia.

    U.S. demand for OCTG will remain low until the end of 2015 as drilling volumes continue to decline, TMK said. It added a gradual recovery of the North American pipe market was not expected until the second half of 2016, subject to oil price growth, increase in drilling volumes and inventory reduction.

    Read more at Reuters

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    BC Iron may venture outside iron-ore

    The chairperson of iron-ore miner BC Iron, Anthony Kiernan, has told shareholders that the company was considering stepping outside of the iron-ore space. 

    Speaking at the annual general meeting, Kiernan said that among the assets that BC Iron acquired in the merger with Iron Ore Holdings at the end of last year, were a number of early-stage, non iron-ore exploration projects. “As part of our longer term strategy, we are having a very close look at these from an exploration point of view with a real preparedness to step outside the iron-ore space,” Kiernan said. 

    “The company has a good balance sheet and an extremely competent operating team, so why not be prepared to utilise these.” Despite BC Iron’s possible new venture outside of the iron-ore space, Kiernan said that the company’s focus would remain on its Nullagine joint venture (JV), with major Fortescue Metals, as well as the development of the Buckland and Iron Valley projects, which were also acquired with the Iron Ore Holdings acquisition. 

    “The Nullagine JV operation has been performing well and costs have been reduced materially through a range of proactive initiatives,” Kiernan said, adding that BC Iron had worked to ensure that its operations were conducted efficiently and cost effectively during the low iron-ore price environment. In order to save costs, 

    BC Iron has previously swapped out its mining contractor and road haulage contractor, and have agreed to trial an alternative structure for its rail and port costs with JV partner Fortescue. “Under this structure, the charges we pay to Fortescue vary with the iron-ore price. Under current trading conditions, this has materially lowered our cost base, and hence the company’s breakeven price,” Kiernan said.
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    China Oct coal transport down 19.7pct on year

    China’s rail coal transport fell 19.7% on year but up 1.95% on month to 157.47 million tonnes in October, registering the 14th consecutive year-on-year decline, showed the latest data from the China Coal Transport and Distribution Association.

    Over January-October, China transported a total 1.66 billion tonnes of coal through railways, down 13.2% from a year ago, data showed.

    Of this, 1.14 billion tonnes or 68.7% of the total were railed to power plants, down 12.8% year on year, with October haulage sliding 18.2% on year but up 0.27% from September to 107.22 million tonnes.

    Coal-dedicated Daqin line transported 29.79 million tonnes of coal in October, a decline of 13.8% from the previous year and down 4.55% from September. Over January-October, Daqin accomplished a coal transport volume of 334.83 million tonnes, dropping 10.5% from the year prior.

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    U.S. Steel to idle Granite City plant; 2,080 to be laid off

    U.S. Steel Corp. will temporarily lay off all 2,080 employees at its Granite City steel plant as the company battles tough market conditions.

    The Pittsburgh-based steel company announced the move Monday afternoon and notified steel workers at the metro-east steel mill. U.S. Steel spokeswoman Courtney Boone said the company has not determined when the temporary closure will occur and for how long employees will be laid off.

    “We need to move orderly through the transitional idling process,” Boone said. “It is based on market conditions and it would not be prudent for us to speculate the length of the idling.”

    Steel workers at the company’s Granite City Works were initially notified of a potential temporary closure earlier last month, as demand for the flat-rolled tubular steel manufactured at the Granite City plant has been declining.

    Boone said market conditions continue to affect operations at Granite City Works, which is forcing U.S. Steel to temporarily consolidate its operations and temporarily close the metro-east mill.

    “I think it’s really important to understand that this is truly related to a number of market conditions affecting the steel industry, where the oil and gas prices continue to stay low and Granite City Works serves those in that market,” Boone said. “In addition to that, there continues to be a glut of imported goods that challenge the overall industry. A number of those goods, we believe, are unfairly traded, and shows an un-level playing field with subsidized steel coming in from other countries. When you add each additional market condition, it makes for a challenging environment.”

    Local union leaders from the United Steelworkers could not immediately be reached for comment following the announcement on Monday afternoon.

    The announcement comes just months after U.S. Steel scuttled a recent plan to temporarily close the Granite City plant and idle workers in May. Instead, the company opted to lay off 80 workers and reduce the plant to one shift.

    The announcement also comes as U.S. Steel employees in Granite City and across the country continue to negotiate for a new contract. The company’s steel workers have been working without a contract since September.

    Read more here:

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    US judge dismisses Rio Tinto lawsuit against Vale

    A US judge on Friday dismissed Rio Tinto's lawsuit accusing rival Vale and others of conspiring to misappropriate its mining rights in the Simandou region, in Guinea. Simandou has some of the world's most valuable iron-ore deposits. 

    Rio Tinto had said in its April 2014 lawsuit that Vale had conspired with Israeli billionaire Beny Steinmetz and BSG Resources. But US District Judge Richard Berman in Manhattan said on Friday that Rio Tinto had waited too long to file the lawsuit after losing the mining rights in December 2008. 

    Under the Racketeer Influence and Corrupt Organizations Act, a US anti-conspiracy law, the Anglo-Australian company would have had to sue within four years, the judge said. "Judge Berman's decision was focused on a narrow point of law and he did not rule on the evidence Rio Tinto has been gathering in the case," Rio Tinto said in a statement. "Rio Tinto is free to both appeal Judge Berman's decision and pursue its claims in other forums, and is actively looking at all options." Vale said it was very satisfied with the decision. 

    "From the start, Vale has kept the most solid conviction that those allegations were groundless," Vale said in an emailed statement. Rio Tinto had accused the defendants of devising a fraudulent scheme to steal its rights over the northern half of Simandou.
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    China's steel output down 3.1% in October

    China's crude steel output dropped 3.1 percent year on year in October, widening from a decline of 0.3 percent for October 2014, the top economic planner said Saturday.

    In the first 10 months of this year, crude steel production dropped 2.2 percent year on year to 675.1 million tonnes, the National Development and Reform Commission said in a statement.

    The production of rolled steel products rose 1 percent to 934.3 million tonnes in the same period.

    The composite price index for domestic steel products stood at 60.11 points in October, down 1.62 points from September and 26.24 points from a year earlier, the statement said.

    The weak data came amid indicators of slowing economy. The country's GDP expanded by 6.9 percent in the third quarter of this year, the slowest quarterly growth in six years.
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    Shaanxi Coal to sell five coal mines to parent amid losses

    Shaanxi Coal Industry Co., Ltd, a major coal producer in northwestern China, planned to sell the stocks and assets of five coal mines to parent Shaanxi Coal & Chemical Industry Group, the company said in a statement on November 23.

    These coal mines were reportedly in great losses at present, and would be closed according to the government requirements. The move could help enhance asset quality of the list company, and produce positive effect on its future profitability, Shaanxi Coal said.

    The five coal mines, all located in Weibei mining area, have a combined capacity of 5.6 million tonnes per annum, and mainly produce lean coal and meagre-lean coal used for coke making and power generation, showed the coal mines database of China Coal Resource website.

    Shaanxi Coal suffered a loss of 1.81 billion yuan ($283.7 million) in the first three quarters, a slump of 295.6% year on year, with severe losses in the Weibei mining area and other subsidiaries.

    The five mines, with an unaudited net asset of 257 million yuan, are expected to complete relevant asset appraisal in early December this year. Transactions would be done before the end of the year.

    Against the backdrop of weak demand and low prices, more companies may put their loss-making mines on sale, while some companies may buy non-coal business assets to diversify asset portfolio for better profitability.
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    Peabody Energy to sell New Mexico, Colorado assets for $358 mln

    Peabody Energy Corp said it had agreed to sell its New Mexico and Colorado coal assets to Bowie Resource Partners LLC for $358 million in cash.

    Bowie will also assume about $105 million in related liabilities, Peabody said on Friday.

    Bowie, which confirmed the deal later in the day, said the acquisition would nearly double its production output to 25 million tons per year, generating annual revenue of $1 billion.

    The deal includes the El Segundo and Lee Ranch mines in New Mexico and the Twentymile Mine in Colorado, which have combined coal reserves of about 330 million tons, the company said.

    The mines are expected to produce 11 million tons and generate pre-tax cash flows after capital expenditures of about $70 million in 2016, Peabody said.

    The company said the deal will lower the amount of its self-bonding in place for reclamation obligations by more than $300 million.

    Peabody is one among many in an industry struggling to cope with a years-long slump in prices of steel-making and power-generating coal.

    Read more at Reuters
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    Chinese leading coal chemical firms report yearly rise in Oct sales

    Chinese leading coal chemical firms report yearly rise in Oct sales

    China Coal Energy, the listed body of China National Coal Group and China’s largest coal chemical firm, sold 33,000 tonnes of polythene in October this year, increasing 10% from September and up 22.2% on year, with sales over January-October soaring 331.9% on year to 298,000 tonnes, showed data from the company’s announcement on November 16.

    The output of polythene in the month stood at 29,000 tonnes, falling 3.3% on month but up 26.1% on year, with output between January and October up 306.8% on year to 297,000 tonnes, it said.

    The sales of polypropylene in October rose 34.6% on month and up 66.7% on year to 35,000 tonnes, with total sales for the past ten months up 407.4% on year to 274,000 tonnes.

    The company produced 28,000 tonnes of polypropylene in October, rising 3.7% from September and up 27.3% from the year prior. Total output between January and October stood at 278,000 tonnes, up 371.2% on year.

    Sales of urea in the month reached 130,000, posting the rise of 28.7% on month and up 51.2% from a year ago, with sales over January-October rising 79.6% on year to 1.3 million tonnes.

    Methanol sales in October fell 5.45% on month and down 33.3% on year to 52,000 tonnes, with sales during the same period up 28.5% on year to 604,000 tonnes.

    In addition, China Shenhua Energy, the listed arm of Shenhua Group, sold 29,500 tonnes of polythene in October, sliding 1% on month but soaring 2581.8% on year, with January-October sales up 23.2% to 2.73 million tonnes, the company said in its announcement released on November 17.

    The polypropylene sales of the company in the same month climbed 38.1% on month and up 2075% on year to 348,000 tonnes, with sales during the past ten months up 17.8% to 2.64 million tonnes, it said.

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    Moody's: Operating environment underpins ratings of Severstal and Gerdau

    Russian integrated steelmaking and mining company PAO Severstal's (Ba1 negative) significantly lower leverage and much higher profitability give it a stronger financial profile than its Brazilian investment-grade peer Gerdau S.A. (Baa3 negative), Moody's Investors Service has said today. However, Brazil (Baa3 stable), the domestic market of Gerdau, has a lower operating environment risk, higher institutional strength and is less susceptible to event risk than Russia (Ba1 negative), Severstal's base of operations. Although the more favourable operating environment, with lower risks, underpins Gerdau's higher rating relative to Severstal's, Gerdau's Brazilian operations continue to struggle with the tough market conditions. Moreover, we expect Brazil's recession to be fairly similar in size to Russia's with the South American country's GDP shrinking 3% in 2015 and 2% in 2016 vs a 4% contraction in Russia in 2015 and 1% in 2016.

    Moody's report titled "Peer Comparison - Severstal's Leverage Lower than More Diversified Gerdau's" is now available on Moody's subscribers can access this report via the link provided at the end of this press release.

    "Severstal's and Gerdau's core domestic markets, Russia and Brazil respectively, are both emerging economies with broadly similar characteristics and continue to drive the companies' cash flow" says Artem Frolov, lead analyst for Severstal.

    Severstal and Gerdau both have very strong positions in their respective domestic markets, where they generate a substantial part of their profits and incur the majority of costs. Gerdau is the largest producer of long-rolled steel in Brazil, a leading producer of long steel in the Americas and one of the largest suppliers of special long steel in the world, while Severstal is one of the biggest players in the flat steel market in the CIS. Both companies have strong positions in their main export markets. Both companies are rated at the level of their respective sovereigns.

    Both companies have a high level of vertical integration, although Severstal has an advantage in terms of raw material self-sufficiency. Severstal produces 97% of its own iron ore needs and 110% of coking coal needs. Gerdau is fully self-sufficient in iron ore and meets 30% of its coking coal needs from its own production in Colombia. Gerdau's ability to source suppliers of scrap metal for its mini-mills operations reduces its exposure to volatile scrap prices, particularly in the US.
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