Mark Latham Commodity Equity Intelligence Service

Friday 1st April 2016
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    Oil and Gas


    Factors of Production

    The classical economics of Adam SmithDavid Ricardo, and their followers focuses on physical resources in defining its factors of production, and discusses the distribution of cost and value among these factors. Adam Smith and David Ricardo referred to the "component parts of price"[7] as the costs of using:

    • Land or natural resource — naturally-occurring goods like water, air, soil, minerals, flora and fauna that are used in the creation of products. The payment for use and the received income of a land owner is rent.
    • Labor — human effort used in production which also includes technical and marketing expertise. The payment for someone else's labor and all income received from ones own labor is wages. Labor can also be classified as the physical and mental contribution of an employee to the production of the good(s).
    • The capital stock — human-made goods which are used in the production of other goods. These include machinery, tools, and buildings.

    The classical economists also employed the word "capital" in reference to money. Money, however, was not considered to be a factor of production in the sense of capital stock since it is not used to directly produce any good. The return to loaned money or to loaned stock was styled as interest while the return to the actual proprietor of capital stock (tools, etc.) was styled as profit. See also returns.

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    Official China PMI goes positive, highest since June 2015. Caixin still down

    Activity levels across China’s manufacturing sector expanded for the first time in eight months in March, according to a report from China’s National Bureau of Statistics (NBS).

    The government’s manufacturing purchasing managers index (PMI) rose 1.2 points to 50.2, marking the first expansion in activity levels seen since June 2015.

    It beat expectations for a smaller increase to 49.3.

    The PMI measures changes in activity levels from one month to the next, with 50 signifying that activity levels were unchanged from one month earlier.

    The vast majority of the strength was concentrated in larger firms, offsetting persistent weakness in small and medium sized enterprises.

    For larger firms the PMI jumped to 51.5 from 49.9 in February. The readings for smaller and medium sized firms came in at 49.0 and 48.1 respectively, indicating contraction.

    Caixin China March Manufacturing PMI 49.7; Est. 48.3

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    Brazil's Rousseff gets relief from Supreme Court, supporters

    Brazil's Supreme Court ruled on Thursday to take a corruption investigation into former president Luiz Inacio Lula da Silva away from a crusading federal judge, as pro-government protests across the country eased pressure on President Dilma Rousseff.

    Local television showed tens of thousands of supporters clad in red marching for Rousseff, who has faced growing calls for her impeachment since anti-corruption judge Sergio Moro released a wiretapped conversation of her and Lula this month.

    Thursday's 8-2 Supreme Court decision grants Lula and Rousseff a breather from Moro by putting Lula's case temporarily in the hands of the top court, all but 3 of whose members have been named since the ruling Workers' Party took office in 2003.

    Lula, Rousseff's predecessor and mentor, is under investigation for allegedly benefiting, in the form of payments and a luxury apartment, from a massive graft scheme uncovered at state-run oil company Petrobras.

    Rousseff is fighting impeachment over unrelated charges of irregularities in the government budget designed to favor her reelection in 2014. She could lose power as soon as May if she does not gain more support in Congress.

    The corruption scandal, Rousseff's Congressional weakness and a deepening economic recession have led to Brazil's worst political crisis since former President Fernando Collor de Mello resigned to avoid impeachment in 1992.

    Up to three million people joined a protest in favor of her ouster on March 13, the largest demonstration in decades.

    On Thursday, Rousseff held a rally with artists and movie stars who support her and said opponents trying to impeach her were merely trying to "give a democratic tint to a coup."

    Aides said her government had had some success in drawing lawmakers from smaller political parties into her government's alliance, which was shattered by the departure this month of Brazil's largest political party the Brazilian Democratic Movement Party (PMDB).

    "The reconfiguration of the base is ongoing," Rousseff's spokesman Edinho Silva told journalists.

    In a sign of a potential split among the PMDB, Senate leader Renan Calheiros said his party's decision to leave the government was "foolish" and "premature."

    The lower house of Congress is due to vote in mid-April on whether Rousseff should stand trial in the Senate for manipulating government accounts. She is not being investigated for corruption.

    Her woes deepened, however, when she tried to appoint Lula to her Cabinet, which would give him some immunity from prosecution because ministers and elected officials can only be tried by the Supreme Court in Brazil.

    Hours after he was named, Moro released a recording of them discussing the appointment. A Supreme Court justice suspended Lula's appointment arguing that it was aimed at illegally shielding him.

    On Thursday, the Supreme Court overruled Moro's decision to release the recording of his call with Rousseff and said it was the only court authorized to wiretap a conversation involving the president. Several justices said the conversation should not be accepted as valid evidence when the court eventually makes a decision on whether Lula can join the cabinet.

    Moro could still take some parts of the Lula investigation, depending on future Supreme Court rulings and whether Lula is ultimately allowed to become a minister.

    Lula released a video on social media praising Thursday's protests and gathering of artists, saying the "anti-coup" movement was growing.
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    Kunming police say Fanya Exchange used investor savings illegally

    Chinese authorities said they have now determined that illegal activity took place at the controversial Fanya Metals Exchange, which ceased operations last year amid accusations by investors that it was running a multibillion-dollar Ponzi scheme.

    The public security bureau in Kunming in the southwestern Chinese province of Yunnan, where the exchange is based, said investigators had now determined the basic facts in the case, which involved the illegal use of savings held by members of the public.

    "Now, the public security organs are deepening the investigation into the Fanya Metals Exchange, related companies and authorised service organisations, and will comprehensively strengthen work aimed at recovering losses," the bureau said in a statement late on Thursday.

    It called on investors to cooperate with the investigation and report full and accurate information to authorities.

    Dozens of investigators took over the Fanya exchange building late last year, following months of protests by investors outside government buildings in Kunming, Shanghai and Beijing.

    Kunming police arrested the head of the exchange, Shan Jiuliang, earlier this year, along with 15 other suspects, the official Yunnan government news website reported on Feb. 5.

    The Fanya Metals Exchange, launched in 2011, advertised itself as a state-supported organisation aimed at boosting the prices of strategic metals mined in China.

    It attracted funds of more than 40 billion yuan ($6.19 billion) from investors across the country, promising 13.68 percent returns and the flexibility to deposit and withdraw money at will. But it began restricting withdrawals last April, blaming "liquidity problems".

    Investors said that regulatory failures allowed the Fanya exchange to operate without a proper license and without proper regulatory supervision, but local officials insisted last month that they had done their job well.

    "We can see some positive signals because after a year they have finally determined that crimes have taken place at Fanya," said an investor based in Shanghai.

    "But while there will be a solution to Fanya, we still seriously doubt whether it will be a fair one (for investors)."
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    We're about to see a mind-blowing demographics shift unprecedented in human history

    The world is about to see a mind-blowing demographic situation that will be a first in human history: There are about to be more elderly people than young children.

    For some time now, economists have observed that the proportion of elderly adults around the world is rising, while the proportion of younger children is falling.

    But within a few years, just before 2020, people aged 65 and over will begin to outnumber children under the age of 5, according to a recent report by the US Census Bureau.

    And these two age groups will continue to grow in opposite directions: The proportion of the population aged 65 and up will continue increasing, while the proportion of the population aged 5 and under will continue decreasing.

    In fact, according to the Census Bureau, by 2050, those aged 65 and up will make up an estimated 15.6% of the global population — more than double that of children under the age of 5, who will make up an estimated 7.2%.

    "This unique demographic phenomenon of the 'crossing' is unprecedented," the report's authors noted.

    There are and will continue to be differences between regions. Europe will remain the oldest region through 2050 with over 25% of Europeans aged over 65 at that time, even though the pace of aging will slow.

    Additionally, although the percentage of China's and India's populations over the age of 65 may not be as large as that of various European countries or Japan, their overall populations are enormous, which means that the total number of older people living in China and India will be much larger than in other countries.

    By comparison, some of the youngest countries will be located in South-Central Asia (Afghanistan), Western Asia (Kuwait, Yemen, and Saudi Arabia) and South-Eastern Asia (Laos).

    In any case, you can see this incredible demographic trend in the chart below. The spot where the two lines cross indicates the moment when the percentages of elderly and under-5 populations are equal, and after that the share of older people will outnumber the share of younger children.

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    Japan's power monopolies face major reform jolt

    Japan's power utilities will lose their monopoly over electricity on Friday in an unprecedented shakeup that could give a much needed jolt to Japan's long stagnant economy.

    Already, a price war has broken out among many of the more than 260 companies that will be allowed to sell electricity in Japan's $70 billion retail market. From April 1, Japanese consumers will be able to buy electricity from suppliers ranging from telecoms conglomerate Softbank and trading firm Marubeni to travel agency H.I.S. and a Hokkaido-based supermarket co-operative that has branched out into solar parks.

    They and others like Japan's biggest city gas operator, Tokyo Gas, are packaging other services, offering loyalty programs and even employing, in the case of Marubeni, the magic of Studio Ghibli, the Japanese animation powerhouse that won an Oscar for "Spirited Away."

    The new entrants are betting they can make money in a low-margin business by undercutting the monopolies brought low financially by the Fukushima disaster and saddled with a high-cost business model after decades of guaranteed profits.

    The government is hoping increased competition in the final remaining restricted part of the electricity market will boost efficiency and innovation and cut prices that are among the highest in the world.

    But the new entrants are competing for space in a market in long-term decline as the population falls and consumers from factories to households look to trim power use.

    What is more likely to happen is regional monopolies would merge and relatively few of the newcomers would survive the coming battle for market share, according to industry officials and specialists, analysts and others contacted by Reuters for this article.

    The regulatory overhaul will only add to the state of flux in the energy sector since the Fukushima nuclear disaster on March 11, 2011 shut down Japan's 54 nuclear plants. Only two of the remaining 42 usable units are operating. The disaster led to rolling blackouts in parts of the country and helped build public support for the liberalization.

    The overhaul leaves the question of atomic power hanging. Major utilities, which still control power distribution grids, are reserving some of that capacity for nuclear, according to a Reuters survey of the utilities.

    Japan has seen explosive growth in renewable energy, particularly solar, since preferential rates were introduced in 2012. By last summer, solar contributed to 10 percent of peak power demand from almost nothing before 2012.

    Wind power could get a boost as well from the regulatory overhaul. Local and foreign companies are stepping up investment with the government maintaining high guaranteed rates for this energy source but cutting those for solar.

    Japan's record use of coal is likely to keep rising, as companies such as Nippon Paper and trading house Mitsubishi Corp plan to build 43 new coal-fired units.

    Liquefied natural gas will remain a key contributor to electricity production in the world's biggest consumer of the fuel.

    Tokyo Electric Power Co, owner of the wrecked Fukushima nuclear plant and the largest of the regional monopolies, is likely to be the biggest loser in the overhaul. Tokyo Gas and JX Holdings are among those targeting Tepco's 29 million customers.

    Six other regional utilities have announced plans to sell electricity to Tepco customers in the Tokyo area, because geographic boundaries among operators will be eliminated.

    Anticipating competition, Tepco has dropped prices for some customers and targeted other regions in Japan. It is changing its logo and tying up with billionaire Masayoshi Son's Softbank Corp to package mobile phone and electricity supplies.

    The second-biggest operator, Kansai Electric Power, is in a more precarious position as the utility most reliant on nuclear power before Fukushima. None of its plants have reopened, after a court order earlier in March kept two reactors at its Takahama plant shuttered.

    "Because of the injunction on Takahama nuclear plant, we were forced to scrap plans to lower fees and we compare very unfavorably in price competition with others," said Kansai Electric chief Makoto Yagi, when asked about the overhaul at a recent press conference.

    Because the utilities still control the grids, they can charge high fees for access to them from newcomers to the industry. Plans to separate the transmission and generation business at the existing monopolies won't be implemented until 2020.

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    Crazy market?

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    Teck forges ahead with Fort Hills, expects big reward when cyclical markets recover

    Canadian diversified miner Teck Resources is aiming to end 2016 with more than $500-million cash in the bank despite funding its portion of the Fort Hills oil sands project construction, in Alberta, and dealing with low commodity prices across its core portfolio. 

    The Vancouver-based company, the largest producer of steelmaking coking coal in North America, as well as holding significant copper and zinc assets in the Americas, would rely on internal free cash flows from its core business units, excluding the Fort Hills project, to fund the remaining $1.2-billion of its share of $2.94-billion in capital expenses, placing significant strain on the company’s balance sheet during the commodity price downturn. 

    The company had managed to push its base metals and coal assets to a cash-flow positive position in the fourth quarter, an important part of its strategy to fund its portion of the C$13.5-billion Fort Hills project from existing facilities and internal cash flows. 

    Speaking during a webcast of Teck’s investor and analyst day held in Vancouver on Wednesday, president and CEO Don Lindsay stressed that Teck was maintained a long-term mind set, open to doing what was necessary in order to thrive, noting that in the event markets worsened significantly over the course of the oil sands build out, 

    Teck was in the enviable position of being able to pull many more levers than its peers could. He mentioned that beyond the ongoing focus on cost reduction, the company could consider to sell some of its infrastructure assets, non-operating assets, agreeing to another precious metals stream transaction, and also if worse came to worst, it had the option of selling royalties on each of its businesses, including on the not-yet-producing Fort Hills project.

    “We are doing due diligence on each of the options putting us in a position to act if we need to, but we will take our time to get it right, to decide which option is the best at the right moment,” Lindsay said. 

    He outlined the company’s priorities this year, stressing its target to hit positive cash flows from its core business this year, which would enable it to fund Fort Hills wholly from internal sources while protecting the company’s strong balance sheet. 

    The company would aim at not drawing upon its $3-billion credit facility this year and preserving its $1.8-billion cash balance as at February 10, to end the year with more than $500-million cash in the bank, all the while evaluating further options to strengthen its liquidity. “We are building a long-life company based on strong assets,” he said, noting that the company would not sell core assets whatever it did. Rather, get assets built during the downturn, as it was currently doing with the Fort Hills oil sands project.

    Lindsay outlined steps to navigate the extended low-price environment and emerge stronger, saying the company was building-out its production-per-share profile. He noted that the company was learning a lot as it progressed and the cyclical markets trended towards higher highs and lower lows. 

    Teck was developing the the Fort Hills oil sands project in partnership with 50.8% owner and operator Suncor Energy and France-based Total, which controlled a 29.2% stake. The miner reported that all critical milestones were being achieved and the partners were focused on opportunities to manage capital cost in the current low-oil-price environment. 

    Lindsay believed firmly in the project’s significant upside when the oil price turned favorably once more, looking forward to the project delivering significant free cash flows from 2018. “A project exposed to the highly cyclical market like oil has the ability to pay back billions in a matter of two or three good years. You just don’t know when. 

    When you look at a 50-year mine life, you are bound to get several of these good years,” he said. To date, crude oil markets had bounced back more than 40% since hitting a low of $26.21/bl early in February. Lindsay said the company was now focused on strong operating execution across its portfolio of long-life assets and resources

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    Eletrobras posts Q4 loss of $2.85 bln on impairments, provisions

    Brazil's state-run Eletrobras, Latin America's largest electricity utility, posted on Wednesday a net loss of 10.438 billion reais ($2.85 billion) for the fourth quarter, due to impairments and provisions for potential legal liabilities.

    The final quarter's results pushed 2015 losses to 14.954 billion reais for Centrais Eletricas Brasileiras SA, as the financially strapped company is also known.

    In the third quarter, Eletrobras posted a net loss of 4.01 billion reais due in large part to a massive impairment charge on its Angra 3 nuclear plant.
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    US power generation by fuel type

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    Russia Said to Plan Doubling Dividends at State Companies

    Russia is nearing a decision to double dividends paid by state-owned companies on last year’s profit as the government struggles to cover a widening budget deficit, according to an official at the Federal Property Management Agency.

    A draft decree on the proposal to raise the payout to a minimum of 50 percent of net income from 25 percent has been submitted to the cabinet, the official said, asking not to be identified as the document hasn’t been signed yet. The proposal covers all state companies including Gazprom PJSC, Aeroflot PJSC, Russian Railways OJSC, VTB Group, Alrosa PJSC, Bashneft PJSC and Rosneftegaz OJSC, which holds a majority stake in Rosneft OJSC.

    Russia, the world’s largest energy exporter, has been battling a decline in budget revenue as oil and gas prices plunged. With sanctions over the Ukraine conflict limiting its access to global financial markets, the government is seeking new ways to bridge the gap, which reached a five-year high last year. It has targeted the oil industry with tax increases and is now looking to raise more than the 140.5 billion rubles ($2.1 billion) it originally planned to reap from state-company dividends this year.

    The Finance Ministry in Moscow is sticking to its target of holding this year’s budget deficit at no more than 3 percent of gross domestic product with an average oil price of $40 a barrel. The 2016 budget was approved last year based on an average oil price of $50. Brent, used to price Russia’s main Urals export blend, gained 1.43 percent to $39.70 on Wednesday.

    Doubling dividend payouts may bring an additional 110 billion rubles to the budget, Olga Dergunova, deputy economy minister and head of the state property manager, said last month. The idea was opposed by Deputy Prime Minister Arkady Dvorkovich, who suggested the government should decide on dividends for each state-run company separately after studying their investment programs and current market conditions.

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    China's Shenhua in talks with CNNC, CGN on stakes in nuclear projects

    China's Shenhua Group is in talks with leading Chinese nuclear developers on taking stakes in domestic nuclear projects, as the country's biggest coal firm tries to diversify into cleaner forms of energy, Shenhua President Zhang Yuzhuo said on Wednesday.

    The nuclear companies Shenhua is in talks with include China National Nuclear Corporation (CNNC) and China General Nuclear Power Corporation (CGN), Zhang told a conference.
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    China Gas price cuts lure customers away from coal

    China's natural gas demand has been boosted by price cuts aimed at switching users from coal to the cleaner fuel, according to one of the country's biggest gas distributors.

    ENN Energy Holdings Ltd has seen its sales rise more than 15 percent in January and February as lower prices encouraged customers to switch, Vice-Chairman Cheung Yip-sang said in Hong Kong. ENN expects full-year sales to rise 15 percent, following last year's 11.5 percent jump to 11.3 billion cubic meters.

    "The movement really picked up a lot of momentum," Cheung said. "The higher burning efficiency of gas and government pressure for better emission standards will help convert more industrial users from coal to gas."

    The government adjusted gas prices twice last year to stimulate demand and shift consumption from coal, which makes up 64 percent of the country's energy mix. The share of natural gas may rise from its current 6 percent, the company said last week, adding that users switching from coal made up 39 percent of new commercial and industrial customers last year.

    China's gas demand expanded 3.3 percent in 2015, while coal consumption dropped 3.7 percent, declining for the second year, according to the National Bureau of Statistics.

    Coal use will slip further this year amid tepid demand from industrial users, according to the China Coal Industry Association.

    The country's liquefied natural gas imports in the first two months of 2016 jumped more than 14 percent and shipments by pipeline rose 15 percent to a record.

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    Signs of Life.

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    China pushes for mandatory integration of renewable power to grids

    China has ordered power transmission companies to provide grid connectivity for all renewable power generation sources and end a bottleneck that has left a large amount of clean power idle, the National Energy Administration (NEA) said in a statement on March 28.
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    China Beige Book Reveals Employment Plunges To 4-Year Low, Capex Worst In History

    Back in December, New York-based China Beige Book Internationalreleased what they called a “disturbing” set of data that pointed to pronounced weakness in the Chinese economy.

    “National sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the prior three months,” the firm - whose CBB is modeled on the Fed’s survey of US economic conditions and is supposed to provide a more objective assessment of China’s economic health than the goal seeked figures that emanate from the NBS - remarked.

    In the three months since the CBB’s last report, we haven’t seen a whole lot in the way of positive data that would have caused us to believe that things are looking up. Exports, for instance, cratered more than 20% in RMB terms last month and 25% in USD terms - the third worst performance in history.

    Sure enough, the CBB’s latest quarterly read on the Chinese economy betrays more pervasive problems including a persistent lack of hiring and a disheartening dearth of capex. “Only 33% of firms reported capital expenditure growth in the first quarter, the lowest in the survey's five-year history,” Reuters reports, adding that “the share of firms reporting capex growth has fallen by over 40 percent since the second quarter of 2014.”

    The CBB’s survey, which includes 2,200 companies and 160 bankers, showed that although profits have risen, hiring has collapsed to a four-year low and that poses a very real problem for the Party which is perpetually concerned with optics. “The weakness in the job market hits at a paramount concern for the Chinese Communist Party,” WSJ notes, before quoting CBB president Leland Miller, who said the following in the report:

    “The party cares very much about the state of the labor market. The first quarter may therefore be one of the rare occasions when investors see the data and react mostly with relief, while the results cause some mild panic back in Beijing.”

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    China’s energy guzzlers Jan-Feb power use down 10.1pct on yr

    Power consumption of China’s four energy-intensive industries dropped 10.1% on year to 244.1 TWh over January-February, accounting for 27.9% of the nation’s total power consumption, the China Electricity Council (CEC) said on March 21.

    Of this, the ferrous metallurgy industry consumed 67.1 TWh of electricity over January-February, falling 18% year on year, compared to the drop of 5.4% from the previous year; while the non-ferrous metallurgy industry used 71.9 TWh of electricity, down 11.8% year on year, compared a 3.5% growth from the year prior.

    The chemical industries consumed 67.9 TWh of electricity during the same period, up 3.3% year on year, lower than a 2.6% growth a year ago; while power consumption of building materials industry dropped 12% year on year to 37.2 TWh, compared to a 5.8% rise a year ago.
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    Brazil party set to abandon Rousseff, eyes presidency

    Brazil's largest party will decide on Tuesday to break away from President Dilma Rousseff's floundering coalition, party leaders said, sharply raising the odds she will be impeached amid a corruption scandal.

    The fractious Brazilian Democratic Movement Party (PMDB) will decide at its national leadership meeting on the pace of disengagement from the Rousseff administration, in which it holds seven ministerial posts and the vice presidency.

    A formal rupture appears inevitable and will increase the isolation of the unpopular Rousseff, freeing PMDB members to vote for her impeachment.

    That makes it likely she will be temporarily suspended from office by Congress by early June and replaced by Vice President Michel Temer, leader of the PMDB, while the Senate decides if she should be permanently ousted.

    Temer aides said the vice president is ready to take over and move fast to restore business confidence in Brazil, in an effort to pull Latin America's largest economy out of a tailspin. Brazilian media reported over the weekend that a team of Temer aides is drawing up a plan for his first weeks as president.

    "On Tuesday we will be disembarking from this government. The vote for independence will win," PMDB Senator Valdir Raupp, who until recently had backed Rousseff, said by telephone.

    Raupp said PMDB ministers would have to resign or leave the party, though a gradual withdrawal from those posts may take place as a compromise to keep the party united.

    Party officials calculate that between 70 to 80 percent of the 119 voting members of the directorate will vote to end the PMDB's alliance with Rousseff and her Workers' Party. One told Reuters that 75 had already pledged to do so.

    Rousseff, a former Marxist guerrilla who is Brazil's first female president, has vigorously denied any wrongdoing and rejects impeachment charges that she manipulated government spending accounts to help her re-election in 2014.The impeachment process only adds to the crisis that has hit Brazil, shaken to the core by its biggest ever corruption scandal - an investigation into political kickbacks to the ruling coalition from contractors working for state oil company Petrobras.

    An attempt by Rousseff to appoint Lula to her Cabinet was the last straw for many of her allies who saw it as a desperate move to shield him from prosecution by a lower federal court that is overseeing most of the Petrobras case, a view fed by a wiretap recording of a conversation between them.

    Brazil's top court is expected to decide later this week if Lula can indeed become a minister. If he is allowed, that means that only the Supreme Court can put him on trial under Brazilian law.


    "The latest events make it very difficult for us to continue supporting the Workers' Party government. The feeling among the party rank and file across the country is that we should leave," said Jorge Picciani, leader of the PMDB in Rio de Janeiro, which had been a bastion of support for Rousseff until recent days.

    Picciani said all but two of Rio's 12 voting delegates were in favor of quitting Rousseff's coalition.

    The departure of the PMDB is expected to lead other smaller parties to bolt from the governing coalition, a domino effect that will further undermine Rousseff's ability to muster one third of the votes in Congress needed to block her impeachment.

    The two largest, the Progressive Party (PP) and the Republican Party (PR), each with 40 seats or more in the lower chamber, have signaled that they are leaving.

    Temer is already looking at ways to cut public spending to tackle a widening fiscal gap that cost Brazil's its investment grade credit rating, the O Estado de S.Paulo newspaper reported on Sunday.

    It said a small team of aides led by Wellington Moreira Franco, Rousseff's former civil aviation minister, is considering sweeping welfare cuts in social programs that would be carried out by the finance minister of a Temer government.

    Two names under consideration for that job are former central bank governors Henrique Meirelles and Arminio Fraga, the newspaper said. A spokesman for Temer declined to comment on the report.

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    China mutual funds turn to commodities, bet on reforms

    China's mutual fund industry is pushing to develop investment products linked to local commodity futures, betting that plans to fight chronic oversupply in the country's mammoth resource sector will drive up prices for raw materials.

    The funds want to branch out beyond their traditional focus on stocks and fixed-income, with no immediate upturn in sight in the wake of turmoil last year that pulled down share markets by nearly 50 percent and forced bond yields to multi-year lows.

    But a government campaign to streamline China's bloated mining industries and crimp supply that has dragged on global commodity markets has buoyed hopes of an enduring recovery in prices of materials such as iron ore and copper, burnishing their appeal to fund managers.

    Inflows from China's mutual fund industry, estimated to have managed 8.4 trillion yuan ($1.3 trillion) by the end of last year, could be a major boost to liquidity in one of the world's largest commodity futures markets, which had transaction values totaling 136.5 trillion yuan in 2015.

    That would ramp up the pricing power of the top consumer of most raw materials at a time when Beijing is looking to increase its sway in international markets.

    "Investors have a growing appetite to diversify their investment destination after the stock market crash, and believe commodities are good assets as China is pushing for capacity-cut reform that will be favorable for raw materials," said Fang Shisheng, a senior official with Orient Futures in Shanghai.

    Shenzhen-based UBS-SDIC Fund Management in August 2015 launched the first Chinese mutual fund product to invest in local commodities, linked to silver futures on the Shanghai Futures Exchange.

    Other funds are now waiting for regulatory approval for similar steps. They include Fortune SG Fund Management, which a company official said was planning a fund that tracks Shanghai copper futures SCFcv1, and Huatai-Pine Bridge Investments, which wants to start a fund to track an index of several agricultural futures.

    Huang Lei, a marketing manager at Beijing-based Harvest Fund, told Reuters the company is also weighing the launch of a commodity product, though nothing has been set in stone.

    Meanwhile, a manager with Wanjia Asset said the Shanghai-based firm was preparingapplication materials to begin a fund that tracks a commodities futures price index, without giving more detail.

    "Commodities futures markets have been very hot these days while there are very few opportunities in other markets, so mutual funds are looking into commodities," she said.


    Several commodity markets around the world have recovered this year, with Dalian iron ore futures DCIOcv1 rallying more than 35 percent since early January and oil futures LCOc1 climbing back near $40 a barrel after plunging below $30.

    For the first two months of this year, total ShFE trading volumes surged about 50 percent, with volumes on the Dalian Commodity Exchange shooting up over 85 percent.

    But some futures brokers warned that Chinese mutual funds would need time to understand commodity futures and to hire experienced traders.

    "The trading of commodities futures is different, requiring strong risk control skills ... but it's becoming a trend for mutual funds to participate in the arena too," said a futures broker who speaks to funds.

    Others saw such diversification as inevitable.

    "Taking the longer view, I ... see the development of new commodity investment funds as the continued and necessary diversification of investment products in China - a process that will continue for many more years," said John Browning, managing director of Hong Kong-based Bands Financial.

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    CRB ETF closes

    Investment Objective

    The ETF seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters CRB Commodity Producers Index (the "Underlying Index").

    Investment Strategies

    The fund, using a low cost "passive" or "indexing" investment approach, seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Underlying Index. The Fund will normally invest at least 80% of its total assets in the equity securities that comprise the Underlying Index and depositary receipts based on the securities in the Underlying Index.


    The Global Commodity Equity ETF (the “ETF” and "CRBQ") is an Exchange Traded Fund (“ETF” and “Fund”) which provides exposure to the equity securities of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services in the agriculture, base/industrial metals, energy and precious metals sectors.

    The Global Commodity Equity ETF Provides the Following Features:

    • Potential Inflation Protection: An increasing money supply, a weakening U.S. dollar, and a lack of investment in overall commodity infrastructure may contribute to an increase in the rate of inflation. Because commodity prices have tended to rise during inflationary times, investors have generally regarded commodities as protection against a decline in the purchasing power of paper currency.
    • Portfolio Diversification: Adding commodity equity exposure to a conventional investment mix of stocks and bonds may improve overall portfolio diversification, thus lowering risk and increasing the potential for enhanced long-term, risk-adjusted returns.Diversification, however, does not eliminate the risk of experiencing investment loss. This ETF does not invest directly in commodities.
    • Participation in Global Demand for Commodities: Emerging markets such as India and China have growing middle and upper classes, which are demanding products and services they once could not afford. Commodity production is limited by the availability of finite resources and by the time and capital needed to bring supplies to market. CRBQ potentially allows investors to benefit from these trends by offering exposure to the equities of commodity producing companies.
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    The New Economy's answer to infrastructure.

    Image titleThe Hyperloop is a futuristic mode of transportation that consists of passenger pods traveling through tubes at speeds of more than 500 miles per hour. And the first one is being built currently in the desert, north of Las Vegas, Nevada.

    According to the Proposition 1A Bond Act, the high-speed rail project has to be  financially viable; trains have to operate (without subsidy) every five minutes in either direction during the day; and funds for each segment of the route need to be identified before work on the leg in question can commence. Above all, trains have to make the 520-mile (840-km) journey between the Los Angeles basin and the San Francisco in two hours and 40 minutes, reaching speeds of 220 mph (350 kph). As for ridership, the rail authority reckoned some 65m to 96m passengers per year would be travelling the route by 2020. The basic fare was to be $55 one way.
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    The Cloud comes of age.

    It has been reported that by 2018, the global market for cloud equipment will reach $79.1 billion. Having burst onto the tech scene in 2006, the “cloud” — as IT leaders, programmers, and marketers know it today — is almost a decade old. From Google Docs to Dropbox, Web-connected humans are glued to the cloud every minute, of every day.
    Image title

    CAD and its associated computer-aided manufacturing (CAM) have typically been on-premises, not remote, systems because of the highly detailed and voluminous designs they must work with. The Engineering Cloud will use a Fujitsu technology, Remote Virtual Environment Computing (RVEC), for high-speed display of virtual desktops developed by Fujitsu Laboratories. RVEC can compress images at high speed and decompress them in the user display, allowing a cloud-based CAD/CAM solution, the spokesmen said.

    One goal of the Engineering Cloud is to allow large and small manufacturers to escape the constraints of PC desktops and use larger cloud-based systems without needing to invest in them directly. If such systems were available from a cloud supplier, then small manufacturers could share data across engineering teams and product designers, regardless of where they were located. Such a move could speed products to market if there was no need to set up common systems between distributed team members. Fujitsu also will supply a product lifecycle management system and a parts database as components of its offering.

     A new IBM Center for Applied Insights study, “Growing up Hybrid: Accelerating Digital Transformation,” revealed an elite group of front-runners achieving business benefits at a higher rate than other organizations. These pack leaders are leveraging hybrid cloud to drive digital change, spring-boarding them into next-generation initiatives such as Internet of Things (IoT) and cognitive computing.

    Thanks to very simple programming, applications can connect to support the swift and efficient flow of information ranging from product SKUs to media buys, CRM data, and credit card transaction details.

    “Cloud based APIs and microservices simplify information exchange,” says Chris Hoover, global vice president of product and marketing strategy at Perforce Software. “It lowers the barrier for new vendors to enter the market.”

    The result, according to Hoover, is a trend in which enterprise companies are moving away from a ‘top down’ approach to software and information exchanges

    Milestones and achievements in 2015 include:

    • A 10x increase in shipments processed by the TMS solution and corresponding 800% increase in corporate revenue. Likewise, there has been a six-fold increase in the number of shippers participating in the Cloud Logistics network.

    Image titleWhat’s important to keep in mind, according to Bolander, is that the tech community isn’t looking at the cloud from a cost-savings perspective anymore. Rather, the cloud has evolved into a tactical advantage for businesses looking to scale strategically.

    There’s an expectation that things should be easy, and it has to be real-time information.We have to integrate all those things and operate at the speed at which the business runs.”

    Once a company starts moving IT into a third-party data center, it’s only a matter of time before entire business processes start heading in that same direction. Once business process outsourcing starts to occur in volume, it becomes apparent pretty quickly that one smaller group of people in the cloud can automate a process or task that used to be performed by 10 times as many people working in 10 different companies. As that trend continues, it’s not like those jobs moved somewhere and will come back one day; they just simply disappeared into the cloud.

     The truth is that no Washington, Brussels or Beijing is offering the kind of leadership required to address these issues. That doesn’t necessarily mean the economic sky will fall tomorrow, but regardless of what anybody stumping for votes thinks you might want to hear, it’s hard to see how things are going to get dramatically better anytime soon. And it’s even easier to see how regardless of who gets elected, preparing for things to get worse before they get better might be a really good idea.

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    China's next stimulus.

    In this context, China is not facing a choice between Keynesian stimulus or supply-side reform, but rather a challenge in balancing the two. In order to avoid a hard landing that would make structural adjustment extremely difficult to implement – not, it should be noted, to prop up growth – another stimulus package that increases aggregate demand through infrastructure investment is needed. Given that China’s fiscal position remains relatively strong, such a policy is entirely feasible.

    The new stimulus package should be designed and implemented with much more care than the CN¥4 trillion ($586 billion) package that China introduced in 2008. With the right investments, China can improve its economic structure, while helping to eliminate overcapacity.

    The key will be to finance projects mainly with government bonds, instead of bank credit. That way, China can avoid the kinds of asset bubbles that swelled in the last several years, when rapid credit growth failed to support the real economy.

    To accommodate this approach, the People’s Bank of China should adjust monetary policy to lower government-bond yields. Specifically, it should shift the intermediate target of monetary policy from expanding the money supply to lowering the benchmark interest rate. Needless to say, in order to uphold monetary-policy independence, China has to remove the shackles from the renminbi exchange rate.

    Structural adjustment remains absolutely critical to China’s future, and the country should be prepared to bear the pain of that process. But, under current circumstances, a one-dimensional policy approach will not work.

    Expansionary fiscal policy and accommodative monetary policy also have an important role to play in placing China on a more stable and sustainable growth path.

    Yu Yongding served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006.

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    Global trade and 3D printers.

    The flow of digital information around the world more than doubled between 2013 and 2015 alone, to an estimated 290 terabytes per second, McKinsey says. That figure will grow by a third again this year, meaning that by the end of 2016 companies and individuals around the world will send 20 times more data across borders than they did in 2008 ...Image title

    It is already in evidence at major companies like General Electric, which is using 3D printers to make fuel nozzles for jet engines and expects its aviation unit to be manufacturing 100,000 parts using the technology by 2020. Such innovations bring closer the day when companies make much greater use of the capacity to receive equipment not by container ship, but by a digital set of orders destined for a 3D printer.
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    Central Banks: exhaustion?

    Image title
    Danielle DiMartino Booth, President at Money Strong, LLC; Former Advisor, Federal Reserve Bank of...
    A former Fed official says the U.S. economy's out of tricks. Here's what we're facing.

    ECB's Draghi plays his last card to stave off deflation

    Kuroda Negative Rate Bazooka Fizzles on Overnight Lending Freeze

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    Oil and Gas

    Saudi says no freeze unless Iran behaves..Breaking.

    Saudi Arabia Will Only Freeze Oil Production If Iran Joins Plan
    Deputy crown prince says `without a doubt' Tehran must agree
    Saudi Arabia sees oil price rising over the next two years
    By John Micklethwait, Riad Hamade and Javier Blas
    (Bloomberg) -- 
    Saudi Arabia will only freeze its oil output if Iran and other major producers do so, the kingdom’s deputy crown prince said, challenging the country’s main regional rival to take an active role in stabilizing the over-supplied global crude market.

    Mohammed Bin Salman interviewed on March 30.

    The warning by Mohammed bin Salman, 30, who’s emerged as Saudi Arabia’s leading political force, leaves the outcome of a meeting between OPEC and other big oil producers this month in question. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country’s nuclear program.

    "If all countries agree to freeze production, we’re ready," bin Salman said in an interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

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    Mechanical problems halt Gorgon

    US supermajor Chevron has faced a setback at its Gorgon liquefied natural gas project in Western Australia, not long after shipping its first LNG cargo.

    The West Australian newspaper reported Friday that Chevron had suffered a mechanical problem with the propane refrigerant circuit on the first LNG train not long after the project's maiden cargo left for Japan last month.

    The newspaper cited unnamed sources as saying the repair bill was likely to cost more than A$100 million (US$76.7 million) and that the project's second cargo was unlikely to sail until the end of the month.

    Upstream has contacted Chevron for more information on the reported mechanical problems at Gorgon.

    The project only began production from the first of three trains last month after years of delays and cost overruns.

    Gorgon was originally expected to cost roughly US$37 billion and begin production in 2014, however the cost blew out to US$54 billion as the start-up was pushed further back.

    Gorgon, with a capacity of 15.6 million tonnes per annum, is supplied from the Gorgon and Jansz-Io gas fields, which lie about 65 and 130 kilometres off the coast, respectively.

    The plant on Barrow Island includes a carbon dioxide injection project and a domestic gas plant with the capacity to supply 300 terajoules of gas per day to Western Australia.

    The Gorgon project partners include operator Chevron on 47.3%, ExxonMobil on 25%, Shell on 25%, Osaka Gas on 1.25%, Tokyo Gas on 1% and Chubu Electric Power on 0.417%.
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    Permian Auction Firm Booms

    The scrapper’s hammer
    One place that is thriving is Terry Dickerson’s Machinery Auctioneers, in Odessa – more evidence of the region’s oil supply chain buckling under the twin pressures of low prices and falling investment. The company does bankruptcy auctions in West Texas for big rigs, hot-oil trucks, frack tanks and other bits of oilfield kit. 

    Its inventory is brimming. In 2014, it did $27m in sales. Last year, that figure rose to $48m and will almost certainly grow this year. The firm used to hold an auction every two months or so. It had three scheduled for March alone.

    Read more:
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    Australia’s Santos names new executive team

    Australian LNG player Santos revealed on Friday it has appointed a new executive team, called Excom, as the company is transitioning to a new operating model in a low oil price environment.

    The new executive team will report to Kevin Gallagher, who started as new managing director and CEO of Santos in February, following the resignation of David Knox.

    The executive team, based in Adelaide compromises of: Bill Ovenden – VP exploration, accountable for developing and executing a targeted exploration strategy; Brett Woods – VP development, accountable for delivering projects, sustaining capital work programs and non-operated assets; Vince Santostefano – COO, accountable for the profit and loss of all Santos operated producing assets ; John Anderson – executive VP commercial and business development; Andrew Seaton – CFO, and Angus Jaffray – executive VP strategy and corporate services.

    “The appointment of the Excom is a key step in establishing a new operating model for Santos that is focused on both lifting productivity and driving long-term value for shareholders in a low oil price environment,” said Gallagher.

    “The new model involves a move away from geographic based business units to an asset focusedmodel with strong technical capabilities in our primary business of exploration, development and production of oil and natural gas both onshore and offshore,” Gallagher added.

    According to the CEO, corporate functions will be consolidated to further reduce costs and improve effectiveness.

    “We will manage our asset portfolio in a manner which delivers value to Santos shareholders,” he concluded.

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    Monaco, UK probe ‘vast corruption scandal’ in oil business

    Monaco’s government says it is helping British authorities investigate a “vast corruption scandal” implicating an unspecified number of international oil companies, the tiny European principality said in a statement released late Thursday.

    The statement said several executives of the Monaco-based company UNAOIL had been questioned over the past few days and that their homes and headquarters had been searched following an urgent request from Britain’s Serious Fraud Office.

    “These searches and interviews took place in the presence of British officials as part of a vast corruption scandal which implicates several foreign companies active in the oil sector,” the statement said. “Evidence will be used by British officials as part of their investigations.”

    Few further details were made available and Monaco’s government said going into specifics might compromise the investigation. A UNAOIL spokeswoman said the company “has no comment at this time.” The Serious Fraud Office also declined comment.

    UNAOIL was at the center of a multi-part expose published Wednesday by the Huffington Post and Australia’s Fairfax Media, which accuses the business of having “systematically corrupted the global oil industry” by delivering millions in bribes on behalf of well-known multinationals to secure contracts.

    The company has denied the allegations. Asked by both publications whether UNAOIL paid bribes, the company’s Chief Executive Ata Ahsani was quoted as saying: “The answer is absolutely no.”

    The publications alleged that a slew of global companies were linked to the scandal, including the offshore arm of Australian contract miner Leighton Holdings.

    On Friday, the Australian Federal Police confirmed they were investigating allegations that Leighton employees were involved in the payment of bribes during two oil projects in Iraq in 2010 and 2011. The police agency declined to comment further, citing the ongoing investigation.

    Leighton changed its name to CIMIC last year. Fiona Tyndall, a spokeswoman for CIMIC, said Friday that the company had no comment.

    The publications said they drew on information gleaned from hundreds of thousands of internal emails between 2002 and 2012 for their six-month investigation.

    Fairfax, which described the trove as “the biggest leak of confidential files in the history of the oil industry,” said the files held evidence of bribes paid to Middle Eastern oil chiefs and other officials, sometimes with the knowledge — and occasionally with the active participation — of the multinationals involved. Investigative reporter Nick McKenzie said that initial tip-off about the scandal arrived in the mail, with instructions to place an ad in a French newspaper carrying the code words “Monte Christo” if he wanted to know more.

    Fairfax said UNAOIL did not challenge of the authenticity of the documents involved and instead sent a letter through its lawyers demanding that Farifax wipe the material from its servers.

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    As US shale drillers suffer, even the bankrupt keep pumping oil

    As oil prices nosedived by two-thirds since 2014, a belief took hold in global energy markets that for prices to recover, many U.S. shale producers would first have to falter to allow markets to rebalance.

    With U.S. oil prices now trading below $40 a barrel, the corporate casualties are already mounting. More than 50 North American oil and gas producers have entered bankruptcy since early 2015, according to a Reuters review of regulatory filings and other data. While those firms account for only about 1 percent of U.S. output, based on the analysis, that count is expected to rise. Consultant Deloitte says a third of shale producers face bankruptcy risks this year.

    But a Reuters analysis has found that bankruptcies are so far having little effect on U.S. oil production, and a tendency among distressed drillers to keep their oil wells gushing belies the notion that deepening financial distress will prompt a sudden output decline or oil price rebound.

    Texas-based Magnum Hunter Resources, the second-largest producer among publicly-traded companies that have filed for bankruptcy, is a case in point.

    It filed for creditor protection last December, but even as the debt-laden driller scrambled to avoid that outcome, its oil and gas production rose by nearly a third between mid-2014 and late 2015, filings show.

    Once in Chapter 11, its CEO Gary Evans said the bankruptcy, which injected new funds to ensure it would stay operational, could help to "position Magnum Hunter as a market leader."

    The company did not respond to a request for comment for this story. However, John Castellano, a restructuring specialist at Alix Partners, said that all of the nearly 3,000 wells in which Magnum Hunter owns stakes have continued operations during its bankruptcy.

    Production figures can be hard to track post-bankruptcy, but restructuring specialists say that many bankrupt drillers keep pumping oil at full tilt. Their creditors see that as the best way to recover some of what they are owed. And as many bankrupt firms seek to sell assets, operating wells are valued more than idled ones.

    "Oil companies in bankruptcy do not seem to automatically curtail production," said restructuring expert Jason Cohen, a partner at the Bracewell firm in Houston. "Lenders are willing to let them continue to produce as long as economically viable."

    For most companies in bankruptcy or considering it, maximizing near-term production does make economic sense. Day-to-day well operating costs in most U.S. shale fields remain well below $40 a barrel. Bankrupt firms are also eligible for new financing that can allow them to keep pumping for some time.


    At least 20 publicly traded companies have filed for creditor protection since the start of 2015. They held at least 95,000 barrel of oil equivalent per day (boepd) in production, according to their last disclosed annual output figures. Another 30 or so privately held companies also have gone bust, in what already is the biggest wave of North American bankruptcies since the subprime mortgage crisis.

    They account for just over 1 percent of U.S. output, but the figure is set to grow with banks expected to slash credit lines to energy firms in their biannual review of borrowing limits in April.

    In what could become the most high-profile reorganization in the sector, Oklahoma City-based SandRidge Energy Inc confirmed on Wednesday that it has hired advisers to review its options, including a bankruptcy filing.

    About a million barrels of U.S. oil production, over a tenth of the total, is under the control of firms considered "financially challenged" estimates Rob Thummel, a portfolio managerat Tortoise Capital Advisors Llc.

    Yet even if many more firms go bust, production is not expected to fall much.

    "I could see (bankruptcies) as a marginal contributor to lower supply, but if you ask me could it ever move the needle, the answer is no," said Bill Costello, a portfolio manager at Westwood Holdings Group.

    The reason is the remarkable gains in productivity of U.S. oil rigs in recent years. The Energy Information Administration (EIA) estimates that a well drilled late in 2015 produces twice as much as one from late 2013.

    As a result, the EIA forecasts output will only drop 7 percent this year to 8.7 million bpd, even after U.S. oil and gas producers have shed more than 100,000 jobs, slashed spending and idled 75 percent of rigs since the end of 2014.

    Many bankrupt firms can sustain their output thanks to so-called debtor-in-possession (DIP) financing for operating and other expenses made available by existing creditors, banks, or private equity firms.

    Magnum Hunter, for example, received $200 million in DIP funding, and so far is being run by the same management as before its bankruptcy.

    Many distressed producers have also drawn down their credit facilities or skipped bond payments prior to filing to conserve cash.

    Among the companies reviewed by Reuters, Swift Energy Co , Samson Resources Corp and American Eagle Energy Corp Co all chose to skip interest payments ahead of bankruptcy filings, citing ongoing talks with lenders to restructure their debt.

    With operating expenses for existing U.S. shale wells between $17 and $23 per barrel, most companies can keep pumping unless oil falls below $20 per barrel, says David Zusman, chief investment officer of Talara Capital Management.

    What bankrupt and financially stretched producers are unable to do is drill new wells and since output from shale wells can fall as much as 70 percent during their first year, a sustained lull in drilling would gradually erode U.S. production.

    Ultimately, the number of bankruptcies may matter less than the lack of funding. The lending reviews now underway are likely to leave more companies without sufficient credit to finance new drilling, analysts say.

    "We could see a 150,000-200,000 bpd fall in oil production if financially challenged producers were to slow spending," said Thummel.

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    India Cuts Domestic Gas Prices 20% Amid Falling Global Rates

    India cut the price of locally produced natural gas by 20 percent for the six months beginning April 1 in line with the fall in global prices.

    Domestic gas prices will be cut to $3.06 per million British thermal units based on the gross heat value, the oil ministry’s Petroleum Planning and Analysis Cell said in a statement on its website. The government had fixed the price at $3.82 per million Btu for the previous six-month period. This is the third straight cut since April 2015.

    The move will dent cash flows at explorers such as Reliance Industries Ltd. and state-owned Oil & Natural Gas Corp. It may also affect spending plans at ONGC, which this week approved a $5.07 billion development in the Bay of Bengal off the country’s east coast. The New Delhi-based company is seeking to maintain its exploration activities in spite of the collapse in oil, while shrinking costs are allowing it to spend less.

    “For ONGC, onshore and offshore put together, $3.10 to $3.20 is the break even point after they pay taxes and royalty,” said Sachin Mehta, oil and gas analyst at Centrum Broking Pvt. The new price “leaves very little for them,” he said.

    India sets gas prices using a formula based on U.S., Canadian, U.K. and Russian rates. The government also announced a ceiling price of $6.61 per million Btu for natural gas extracted from deepsea fields that start production from this year. The cap is effective for the six months to September.

    Every $1 reduction in gas prices leads to a decline of 40 billion rupees in ONGC’s revenue on an annual basis, said Director, Finance A.K. Srinivasan.

    “Extrapolating from that, the impact will be around 15 billion to 16 billion rupees” for the six months to September, he said.

    The reduction comes weeks after the government announced a new policy on gas from deep-water fields, giving companies a higher price and marketing freedom. That price is linked to four alternate fuels -- liquefied natural gas, fuel oil, naphtha and imported coal.
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    Superior Energy scraps dividend, cuts executives' pay

    Oilfield services provider Superior Energy Services Inc scrapped its quarterly dividend and cut the base salaries of its executives as part of efforts to preserve cash amid a prolonged slump in crude oil prices.

    The executives' base salaries have been reduced by 15 percent, effective April 1, thecompany said in a regulatory filing on Thursday.

    The Houston-based company also approved a 15 percent cut in the annual director fees.

    A near-65 percent plunge in crude oil prices since June 2014 has forced oil and gas producers to slash spending and scale back drilling, hurting demand for services provided by companies like Superior Energy.

    "This downturn has been severe in extent and duration...," Chief Executive David Dunlap said in a statement.

    Superior Energy joins a growing list of energy companies such as ConocoPhilips, Noble Energy and Cimarex Energy who have slashed or eliminated their dividends.

    Superior Energy, which paid a quarterly dividend of 8 cents per share last month, posted a bigger-than-expected loss in its fourth quarter in February.

    The company said in July it had cut 24 percent of its workforce since the end of 2014.
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    Russia's Sibur talking to Sinopec about gas plant investment

    Russian petrochemical company Sibur is in talks with shareholder Sinopec about investing in a planned gas chemical plant in Russia's Far East, Sibur boss Dmitry Konov told reporters on Thursday.

    Sibur plans to buy gas from fields which Russia's Gazprom will develop in Eastern Siberia.

    "We are discussing (investments into the plant) with a number of possible partners, including Sinopec," Konov said.

    He said a subsidiary of the Chinese firm, Sinopec Engineering Group, may also take part in constructing the plant.

    In December, Sinopec paid $1.338 billion for a 10 percent stake in Sibur and said it planned to acquire an additional 10 percent within three years.
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    Have we reached Peak Oil?

    Pascal BriodPascal Briod, Interested in energy and environmental issues, had some lectures about global... 4.5k Views • Pascal is a Most Viewed Writer in Peak Oil. It depends from the type of oil we are talking about. The short answer is: we reached the peak of conventional oil, but we haven't reached (yet) the peak of non-conventional oil. 

    Peak oil is a hardly debated theme, between those who - considering the fact that oil is a finite resource – think that the production is going to peak soon and those – considering that price reflects resource scarcity – argue that we still have enough oil. The radically different point of views of these two groups, known as the “Geologists” and the “Economists” (The myth of the oil crisis, Mills 2008), certainly reflect two different ways of apprehending and understanding non-renewable resources, but the difference in their conclusions regarding peak oil can often be explained by the fact that they don’t speak about the same oil. 

    Most of the people who think we haven't reached Peak Oil do agree that the production of conventional oil has peaked. Even the International Energy Agency (IEA), who didn’t talked about peak oil at all until recently, had now acknowledged in her 2010 World Energy Outlook, that the production of conventional oil has peaked in 2006: “Crude oil output reaches an undulating plateau of around 68-69 mb/d by 2020, but never regains its all-time peak of 70 mb/d reached in 2006” (International Energy Agency, 2010)

    This chart from the 2010 World Energy Outlook (IEA) shows the peak of crude oil production in 2006, followed by a suspiciously flat plateau until 2035, giving a big importance to the fields “yet to be found”.  But what is important in this figure is that the oil production continues to increase at the global level, thanks to unconventional oil (Natural gas liquids being one type of unconventional oil).
    Image title
    The big question here is the potential of unconventional oil (extra-heavy oil, tar sands, oil shales, biomass-to-liquid, coal-to-liquid, gas-to-liquid). It appears that the reserves are enormous, but it is hard to say how much of it we will be able to recover.
    Image title

    But what is determinant above all, is the rate of production the industry can achieve: the production of unconventional oil is indeed restrained by important environmental, technological, political and economic constraints. But despite high production cost and big investment requirements, unconventional oil production - if not politically restrained – is likely to play a major role in replacing conventional oil. Moreover, unconventional oil is not only a future energy as most unconventional oils have already been commercialized for a long time and are already profitable at current oil prices.

    The transition from conventional to unconventional oil raises very important issues, because it is more expansive to produce but above all because much more energy is needed to produce it. In other words, the total GHG’s emissions of each liter of oil we consume will tend to increase as unconventional oil progressively replaces conventional oil, multiplying the effects of the growing consumption of energy and the consequent impacts on global climate... but that's another question.

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    Petrobras to save $500 mln a year with reorganization plan

    State-controlled Petróleo Brasileiro SA, the Brazilian oil producer at the center of a sweeping corruption probe, plans to save 1.8 billion reais ($500 million) a year through a reorganization plan that includes the merger of several business units, job cuts and a streamlining of activities.

    In a securities filing, the company known as Petrobras said on Wednesday that a new governance model will lead to a 43 percent reduction in 5,300 jobs with diverse non-operational responsibilities. Petrobras is cutting costs, reducing capital spending and selling assets to stem the impact of slumping oil prices and the probe, which partially curtailed access to financing.
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    Asia's record LPG shortfall to attract increasing U.S. exports

    Asia's record LPG shortfall to attract increasing U.S. exports

    Asia's supply shortfall of liquefied petroleum gas (LPG) will rise to record highs for at least the next two years, drawing ever more U.S. exports to fill the void.

    The deficit between what Asia can supply and demand for LPG will rise to a record of 1.42 million barrels per day (bpd) in 2016, surpassing last year's 1.3 million bpd, said David Wech, managing director of consultancy firm JBC Energy.

    This deficit will increase to 1.5 million bpd by 2017, he added. As a result, the region may draw almost 300,000 bpd of LPG from the United States in 2016 and 340,000 bpd in 2017, said Wech.

    U.S. exports to Japan, South Korea, Singapore and China, the world's largest LPG consumer, already hit a record in 2015, averaging 248,000 bpd, data from the U.S. Energy Information Administration showed.

    Importers of U.S. LPG include Japan's Astomos Energy Corp and Eneos Globe Corp, South Korea's E1 and China's Unipec.

    "Since 2009, every year has seen a new all-time high in Asia's LPG deficit due to strong LPG demand growth," said Wech.

    U.S.-based Enterprise Products Partners and Phillips 66 are poised to fill Asia's demand as they have either recently expanded their export capabilities or, in the case of Phillips, will be opening a new terminal later this year.

    "In the case of South Korea, around 80 to 85 percent of the LPG imports are from the Middle East (Asia's key supplier) and 15 to 20 percent from the U.S, which will likely increase its share from this year. It will be an interesting market," said a LPG consumer.

    The U.S. holds a price advantage over Middle Eastern suppliers with propane at the Mont Belvieu, Texas, hub at 43 cents per gallon, or about $230 a tonne, although that does not include freight for the voyage to Asia. That compares to the current contract price from Saudi Aramco at $283.

    LPG is a mixture of two gases, butane and propane. Asian consumers primarily use the fuel for cooking and heating but the gas also powers cars and is used as a petrochemical feedstock.

    Asia's growing dependence on U.S. LPG may mean higher propane and butane prices for American consumers as exports pull supply away, analysts at Barclays Capital said in a March 28 note.

    "As supply and demand fundamentals continue to improve due to increased export levels and domestic (U.S.) demand, we believe ethane and propane are well positioned," said Barclays.

    The region's total LPG consumption, including the Indian subcontinent, is projected to reach 113 million tonnes in 2016, or about 3.6 million bpd, said Yanyu He, director of Natural Gas Liquids Research at IHS, adding that the region has the most acute supply shortages in the world.

    This is up from 105 million tonnes in 2015 and it will grow to 121 million tonnes next year, said He.

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    OPEC oil output rises in March as Iran, Iraq growth offsets outages

    OPEC oil output is rising in March, a Reuters survey found, as higher supply from Iran after the lifting of sanctions and near-record exports from southern Iraq offset maintenance and outages in smaller producers.

    The survey also found no major change in production in top exporter Saudi Arabia - another sign that Riyadh is serious about freezing output to support prices, which hit a 12-year low near $27 a barrel in January but have since recovered to $40. Producers are meeting on April 17 in Qatar to discuss the plan.

    "The production freeze has put a floor under the price," said Carsten Fritsch, analyst at Commerzbank. "We see a risk of a short-term setback if the meeting produces a disappointment."

    Supply from the Organization of the Petroleum Exporting Countries has risen in March to 32.47 million bpd from 32.37 million bpd in February, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

    The biggest rise came from Iran following the lifting of Western sanctions in January. Tehran, which wants to recover market share it lost under sanctions, has said it will not take part in the production freeze.

    Iran has increased output by 230,000 bpd since December, according to Reuters surveys. Iranian officials say the increase in supplies is much larger.

    Iraq, OPEC's largest source of supply growth in 2015, managed to raise output. An increase in southern exports to what may be a new record in March offset disruption to flows along a pipeline carrying oil from the Kurdish region.

    Angolan exports rose. In countries where output has fallen, the drop was the result of outages and maintenance rather than voluntary restraint.

    Output declined in the United Arab Emirates, where work on oilfields that produce Murban crude is curbing production. The maintenance will not be completed until April.

    There was a further decline in Nigeria due to a whole month of disruption to the Forcados crude stream operated by Royal Dutch Shell's local venture, but this was partially offset by higher supply of other grades.

    Libyan output, already at a fraction of rates seen before the country's civil war, fell due to apower outage. Supply in Venezuela edged lower.

    Saudi Arabia kept output steady compared with February, sources in the survey said, citing stable to slightly lower exports in March. Saudi production was assessed at 10.18 million bpd versus 10.20 million in February.

    OPEC production has surged since the group in November 2014 abandoned its historic role of cutting supply alone to prop up prices, in the hope that lower prices would curb the growth of more costly-to-develop competing supply sources.

    The extra OPEC crude added to a global glut, and this year's output freeze agreement represents the first cooperation on supply policy between OPEC and non-OPEC since 2001.

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    InterOil provides drilling update and 2015 results

    -Antelope-6 identified 138 feet of dolomite with connectivity to rest of field
    -Antelope-5 extended well test confirms excellent reservoir qualities
    -Entering final stages of appraisal of the Elk-Antelope field
    -GLJ increases year-end Contingent Resource estimate
    -Raptor 3.6 Tcfe, Bobcat 2.4 Tcfe (independent est'd gross unrisked 2C resource)
    -$252 million liquidity at end 2015. Proposal to increase and extend credit facility.

    InterOil Corporation (NYSE: IOC; POMSoX: IOC) today provided an update on its operations and financial results for the fourth quarter and financial year ending December 31, 2015.

    InterOil Chief Executive Dr Michael Hession said momentum was building for the multi-billion dollar Papua LNG project with Antelope-6 intersecting 42 meters (138 feet) of dolomite with connectivity to the rest of the Antelope field. In addition the excellent reservoir qualities, identified by a short flow test last year at Antelope-5, were successfully confirmed by a longer flow-test in Q1 2016.

    'During 2015, significant milestones were achieved with the appointment of Total as operator and the selection of the Papua LNG project's key infrastructure sites. Analysis from independent sources suggests Papua LNG will be one of the most competitive new-build LNG projects globally, with short shipping distances to Asian markets and potential for attractive returns.

    'The data from the last three appraisal wells have surprised on the upside and extended flow tests have confirmed connectivity, deliverability and excellent reservoir quality across Antelope. This will mean a less complex and lower cost development,' said Dr Hession.

    'While the analysis of the Antelope-6 well and the Antelope-5 flow test is continuing, results to date have been encouraging and we remain confident of a two-train LNG development. On completion of the appraisal program, data will be submitted to two independent auditors for certification, a process which could take four to six months.'Following last year's restructuring and streamlining of the business, we have reduced guidance on our expected 2016 spend to a lower range of $155 million to $170 million, predominantly focused on the Papua LNG project. While we have $252 million in current liquidity at the end of 2015, we are in discussions with our lenders to increase and extend our credit facility. It is proposed to complete the increased and extended facility in the second quarter of 2016.

    'In 2015, the Company had the Raptor and Bobcat discoveries independently assessed for 2C natural gas and natural gas liquids. These equate to a gross unrisked resource estimate of 3.6 Tcfe and 2.4 Tcfe respectively. This first-time external assessment provides a good basis for discussions with various strategic partners.

    'Our focus in 2016 will be on completing the appraisal program, progressing the certification of Elk-Antelope volumes, advancing the world-class Papua LNG project from Basis of Design to FEED and monetizing our independently assessed discoveries with strategic partners,' stated Dr Hession.

    Following the full analysis of the recent flow test and drilling results, the PRL 15 JV is expected to decide in Q2 2016 if a further appraisal well, Antelope-7, is required. The encouraging appraisal data gathered to date continues to support InterOil's confidence in a two-train LNG development.
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    Summary of Weekly Petroleum Data for the Week Ending March 25, 2016

    U.S. crude oil refinery inputs averaged over 16.2 million barrels per day during the week ending March 25, 2016, 414,000 barrels per day more than the previous week’s average. Refineries operated at 90.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.4 million barrels per day. Distillate fuel production increased last week, averaging over 4.9 million barrels per day.

    U.S. crude oil imports averaged over 7.7 million barrels per day last week, down by 636,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.0 million barrels per day, 9.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 516,000 barrels per day. Distillate fuel imports averaged 98,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.3 million barrels from the previous week. At 534.8 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.5 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.1 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.6 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 1.5 million barrels last week.

    Total products supplied over the last four-week period averaged 19.5 million barrels per day, up by 2.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 5.0% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the last four weeks, down by 3.4% from the same period last year. Jet fuel product supplied is down 1.9% compared to the same four-week period last year.

    Cushing crude -272k
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    US Oil production drops 16,000 bbl day in latest week

                                                  Last Week   Week Before    Last Year

    Domestic Production '000........  9,022            9,038             9,386
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    EIA report shows decline in cost of U.S. oil and gas wells since 2012

    Image title

    The profitability of oil and natural gas development activity depends on both the prices realized by producers and the cost and productivity of newly developed wells. Overall trends in well development costs are generally less transparent than price and productivity trends, which are readily observable in the markets or through analyses of well productivity trends such as EIA's monthly Drilling Productivity Report.

    In an effort to increase understanding of the costs of upstream drilling and production activity, EIA commissioned IHS Global Inc. (IHS) to study these costs on a per-well basis in the Eagle Ford, Bakken, Marcellus, and Permian regions, analyzing the Permian's Midland and Delaware basins separately. Upstream costs in 2015 were 25% to 30% below their 2012 levels, when per-well costs were at their highest point over the past decade. Changes in technology have affected drilling efficiency and completion, supporting higher productivity per well and lowering costs, while shifts towards deeper and longer lateral wells with more complex completions have tended to increase costs.

    Costs per well generally increased from 2006 to 2012, demonstrating the effect of rapid growth in drilling activity. Since 2012, costs per well have decreased because of reduced overall drilling activity and improved drilling efficiency and tools. Changes in costs and well parameters, such as the need to drill deeper or longer lateral wells, have affected the onshore oil plays differently in 2015, with recent per-well costs ranging from 7% to 22% below 2014 levels.

    Differences in geology, well depth, and water disposal options can affect costs for each onshore oil play area. The adoption of best practices and the improvement of well designs have reduced drilling and completion times, decrease total well costs, and increase well performance. Greater standardization of these drilling and completion practices and designs across the industry should continue to lower costs. The drilling cost per foot, based on total depth, and the completion cost per foot, based on lateral length, are both projected to maintain these lower cost trends through 2018. Sustained lower upstream costs may affect near-term oil and natural gas markets, and ultimately, the prices of these fuels.
    Image title

    Source: U.S. Energy Information Administration, Trends in U.S. Oil and Natural Gas Upstream Costs

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    Eurogas: European LNG imports up with rising gas consumption

    Eurogas, the association representing European gas distributors on Wednesday estimates the gas consumption went up 4 percent in 2015 compared to the year before.

    According to the initial estimates, European gas consumption reached a 426.3 billion cubic meters, which was reflected in a rise in LNG imports, a result of the supply diversification, Eurogas said in its report.

    As the association informs, this was the first rise in gas consumption in four years.

    Eurogas noted that LNG had the largest share of gains in imports in some countries, such as the Netherland where it almost doubled, while LNG imports in Italy jumped some 34 percent.

    One of the contributing factors was the weather as well as the economic recovery in countries such as the Czech Republic, France and Slovakia which posted an increase in industrial gas demand. Other countries did, however, post a decline in this sector.

    Due to a drop in gas prices, it also gained a share in the power sector in the United Kingdom, Italy and Greece while tax regime in Finland curbed the gas consumption.

    Compressed natural gas market developed in countries such as the Czech Republic where CNG consumption rose 46 percent year-on-year, Eurogas said.

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    BP and Kuwait Petroleum Corporation sign cooperation agreement

    BP and Kuwait Petroleum Corporation (KPC) have signed a framework agreement to explore possible joint opportunities for investment and cooperation in future oil, gas, trading and petrochemicals ventures.

    Signed by BP chief executive officer Bob Dudley and KPC chief executive officer Nizar Mohammad Al-Adsani, the agreement paves the way for both companies to jointly invest and cooperate in oil and gas projects in Kuwait and globally.

    'BP's commitment to Kuwait dates back to our participation in the discovery of the giant Burgan oil field in the 1930s and we are there today extending the life of the field,' Dudley said. 'We look forward to working with KPC to help the people of Kuwait realize the full potential of their nation's oil and gas resources and exploring new opportunities globally.'

    In addition to enhancing oil and gas recovery from Kuwait's existing resource base, the agreement also includes the intention to study opportunities for joint investment in future oil and gas exploration both inside Kuwait and globally. Other elements of the agreement cover possible future oil and gas trading deals including LNG trading and related ventures.

    Opportunities for cooperation and investment in midstream and petrochemical projects globally will also be considered under the agreement, including potentially deploying BP's proprietary paraxylene technology as part of KPC's petrochemicals projects.
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    EXCO Resources says borrowing base cut by 13 pct to $325 mln

    EXCO Resources Inc said its lenders have cut its borrowing base by 13 percent to $325 million amid a slump in oil prices.

    Small and mid-sized oil and gas companies are expected to see large cuts to their credit lines when banks reassess reserve-based loans this spring in the backdrop of a 60 percent drop in oil prices.

    The cut comes two days after larger producer Whiting Petroleum Corp said its borrowing base was slashed to $2.75 billion from $4 billion.
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    SandRidge hires advisers to evaluate options including bankruptcy

    The company said there was substantial doubt about its ability to continue as a going concern. 

    A more than 60 percent fall in oil prices since mid-2014 has eroded cash flows at several oil and gas producers, leaving them struggling to service debt payments.

    SandRidge, which is working with law firm Kirkland & Ellis and investment bank Houlihan Lokey on debt restructuring options, has drawn down its revolving credit line, and has tried to trim costs with asset sales and job cuts.

    Reuters reported in January that the heavily indebted oil and gas company has been exploring debt restructuring options, including a pre-packaged bankruptcy.

    Oklahoma City-based SandRidge, which reported results on Tuesday after delaying the filing, had about $3.63 billion in total debt as of Dec. 31.

    SandRidge, which produces oil and gas from shale formations in Oklahoma and Kansas, was founded in 2006 by Tom Ward, who also co-founded natural gas company Chesapeake Energy Corp (CHK.N). Ward was ousted as chief executive in 2013 by SandRidge's board after a proxy fight with shareholders.
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    Sinopec to Double Natural Gas Output by 2020 as China Shuns Coal

    China Petroleum & Chemical Corp., one of the country’s state-run energy giants, plans to ride a wave of new gas discoveries to double annual output to 40 billion cubic meters by 2020 as the country pushes to replace coal with the cleaner fuel.

    Sinopec, as China Petroleum is known, will produce 29.5 billion cubic meters of conventional natural gas, 10 billion cubic meters of shale gas and 500 million cubic meters of coal-bed methane by 2020, almost doubling its 2015 gas output of 20.8 billion cubic meters, Chairman Wang Yupu said at a press conference in Hong Kong Wednesday.

    The 2020 target doesn’t include 2 billion cubic meters of annual output from a shale gas production facility in southern Sichuan province that Sinopec will begin building this year, President Li Chunguang said at the same event. The bulk of the company’s shale gas output comes from its flagship Fuling field in Chongqing, Li said.

    The Beijing-based company, which lost its spot as China’s No. 2 oil and gas producer to rival Cnooc Ltd. after cutting output from high-cost fields in 2015, sees natural gas as a more attractive expansion opportunity than crude. A price of $60 a barrel is needed for all Sinopec oil fields to make a profit, Wang said. Brent crude, the global benchmark, was trading in London at $39.69 on Wednesday, up 6.5 percent this year.

    China plans to cut coal consumption to 62 percent in the country’s energy mix by 2020 and raise natural gas consumption to more than 10 percent, according to China’s 2014-2020 energy development strategy released by the State Council. Coal last year accounted for 64 percent of China’s total energy consumption, while natural gas accounted for about 6 percent.

    Sinopec made several significant natural gas discoveries in China’s Sichuan province and the Erdos basin of Inner Mongolia in the past year, Wang said, adding the discoveries will provide strong support for the company’s natural gas expansion.

    The company will build pipelines and storage sites, as well as facilities to liquefy natural gas, in Sichuan and provinces along the Yangtze River to send gas to end users in populous riverside cities, Wang said.
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    Shell says Dutch investigators visit Shell headquarters in Nigeria oil probe

    Royal Dutch Shell said on Wednesday Dutch investigators recently visited its headquarters in the Hague in the Netherlands in relation to an investigation into a Nigerian offshore oil field.

    "Representatives of the Dutch Financial Intelligence and Investigation Service and the Dutch Public Prosecutor recently visited Shell at its headquarters, " a spokesman said.

    "The visit was related to OPL 245, an offshore block in Nigeria that was the subject of a series of long-standing disputes with the Federal Government of Nigeria."

    Shell is cooperating with the authorities and is looking into the allegations, the spokesman said.
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    Iran can add 500,000 bpd oil supply in a year- IEA chief

    Iran is expected to add half a million barrels of oil supply a day within a year from its existing oilfields after the lifting of sanctions against Tehran in January, but developing new fields would take time, the head of the International Energy Agency said on Wednesday.

    Iran, previously OPEC's second-largest exporter, would need to prove that the investment conditions were profitable to the international investors and also that there was predictability in the markets, Fatih Birol, IEA's executive director told Reuters.

    Birol's estimate of Iran's supply increase from existing oilfields was in line with previous market estimates.

    And increases in Iranian gas supplies would come after oil, he said.

    "It was misleading to believe that there would be a huge amount of new Iranian crude and natural gas production entering market in the short term," Birol said on the sidelines of an event in Beijing to mark the 20th anniversary of cooperation between China and IEA.

    "It would take some time in terms of developing new oil fields, finding transmission routes and having the necessary market conditions."

    Iranian oil officials were hoping for a quick rebound in oil sales to European clients, which accounted for over a third of Iran's exports, or 800,000 barrels per day, before the European Union imposed sanctions in 2012 over Tehran's nuclear programme.

    The IEA chief said that may take some time too given ample supply in the market and lack of growth prospects in Europe.
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    US Shale Oil Was Never Going To Stand Still

    Image title

    TECHNOLOGY doesn't stand still. That's the whole point about technology as any oil, gas or chemicals engineer will tell you.

    The above chart is a fantastic example of this. It shows how the efficiency of US oil rigs, thanks to improvements in the fracking process, has improved by leaps and bounds from 2012 onwards.

    The chart also tells you something else equally important: US inventories have risen to ever-greater record highs as fracking techniques have improved.

    The good news is that many analysts predicted improvements in fracking technology, and thus have assumed lower production costs. But the bad news starts with the fact that most analysts have hugely underestimated the speed of innovation.

    The even bleaker news is a widespread misunderstanding of how businesses have always worked in times of financial distress, which is just one of the reasons for the build-up in inventories:

    Why shut down altogether and have no chance of paying anything back on your debt? This just doesn't make sense - and has never been how the corporate world has worked.
    Any company in any sector will instead continue to run their assets as its lack of cash-flow rather than debt that often kills companies.
    And, anyway, banks can always be persuaded to write off debt. They often have little choice, as if they foreclosed on a company they might not get even one cent back.

    Combine this with the giant leaps in fracking technology and you have some of the important context you need to understand today's chart.

    What happens next? Production costs will keep coming down, and assets on the ground that might eventually go bankrupt will remain exactly that - assets on the ground. A private equity company might, say, come a long, buy up a shale oil asset debt free and then run it as hard as possible, as the private equity company will only have to cover variable costs.

    There is also my long-standing argument that one of the few genuine bright spots in the US economy is shale oil - and, of course, shale gas as well. In a deflationary world, politicians on both sides of the US divide will be keen to provide every incentive possible that encourages greater oil and gas production. A good example of this was the recent decision to lift the ban on US oil exports.

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    TransCanada Said to Raise C$4.42 Billion in Record Sale

    TransCanada Corp. raised C$4.42 billion ($3.37 billion) in the largest share sale in Canadian history, according to people familiar with the offering, sending energy financings in the country to the best start in at least two decades.

    TransCanada’s sale to help fund its acquisition of Columbia Pipeline Group Inc. eclipsed Barrick Gold Corp.’s C$4.33 billion issue in September 2009, according to data compiled by Bloomberg.

    TransCanada said it agreed to sell 92 million subscription receipts for C$45.75 each to a group of banks led by Royal Bank of Canada’s RBC Capital Markets and Toronto-Dominion Bank’s TD Securities. The banks, which resell those securities, had an option to buy an extra 4.6 million subscription receipts, or 5 percent of the offering, which lifted proceeds to C$4.42 billion.

    Mark Cooper, a TransCanada spokesman, declined to comment on the size of the share sale.

    Liquid Securities

    The sale lifts announced equity financing in Canada’s energy industry to C$8.59 billion this year, up 66 percent from a year ago and the best start to the year since at least 1994, the data show. Energy firms have been pursuing financing to fund takeovers and capital expenditure plans as the price of crude rallies from the worst downturn in a generation. Investors are only too willing to lap up shares.

    “Investor demand has been very strong on recent transactions," Kirby Gavelin, RBC’s head of equity capital markets, said in a phone interview. “They’ve been large transactions so certainly there’s a focus on large market cap, liquid securities, which attracts a broad range of global investors."

    In addition to TransCanada, other offerings included a C$2.3 billion sale by Enbridge Inc., and C$300 million offerings from Pembina Pipeline Corp. and Seven Generations Energy Ltd. Energy companies accounted for two thirds of the C$13.1 billion raised from stock sales in the country, Bloomberg data show.

    A turnaround in oil prices and lower volatility in the public markets are helping drive share sales. U.S. crude rose about 46 percent to $38.18 a barrel at 1:26 p.m. in New York on Tuesday from its lowest settlement of $26.21 on Feb. 11, marking a bounce in a price slump that has exceeded 21 months.
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    Kuwait Agrees with Saudis to Resume Oil Output at Shared Field

    Kuwait agreed with Saudi Arabia to resume production at an offshore oil field shared by the two OPEC members, the official Kuwaiti news agency reported, without giving a specific time for the restart.

    The two countries are preparing to start maintenance at Khafji, Kuwait News Agency reported, citing the nation’s acting oil minister, Anas al-Saleh, speaking in parliament. Production will start initially in “small quantities, which would be increased taking into consideration environmental concerns” before returning to normal levels, according to KUNA. Production at Khafji halted in October 2014 because of environmental concerns.

    The plan to restart Khafji comes as Saudi Arabia and Kuwait are set to attend a meeting of OPEC members and other producers in Doha, Qatar, next month to discuss a proposed freeze in output. The participants including Russia are seeking to prop up prices that have slumped since mid-2014.

    “I’m skeptical until I see some confirmation from the Saudi side or some signs that work is being done at the field,” said Robin Mills, chief executive officer at Qamar Energy in Dubai. The plan to restart Khafji won’t affect the Doha meeting because production probably won’t have started in major quantities by then, Mills said.

    Production in the shared area between Kuwait and Saudi Arabia, known as the Neutral Zone, reached 600,000 barrels a day in 2011, including output from Khafji and the onshore Wafra field, according to data compiled by Bloomberg Intelligence. The Khafji shutdown led to a loss of 300,000 barrels of daily output, Prince Abdulaziz bin Salman, Saudi Arabia deputy oil minister, said last year.

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    E.ON agrees price cut with Gazprom, raises outlook

    Russia's Gazprom on Tuesday offered E.ON a price cut on its long-term gas supplies, ending years of unsuccessful talks and allowing the German utility to raise its outlook for the current year.

    European gas firms such as E.ON are being squeezed as they buy gas under long-term deals with Gazprom linked to the price of oil while having to sell it to customers at lower retail prices linked to the freely traded spot market.

    While plunging oil prices, down by nearly two-thirds since mid-2014, have eased the burden on utilities, Russian gas supplies still tend to fetch a premium over European hubs - a situation that buyers are keen to resolve given the pressure on earnings from competing renewables in their domestic markets.

    The deal, which resolves arbitration proceedings between E.ON and Gazprom, will lead to a positive one-off effect of about 380 million euros ($425 million) on E.ON's core earnings (EBITDA) in the first quarter of 2016.

    "With this agreement the prices are adjusted on the basis of our current market conditions," E.ON said in a statement on Tuesday, adding its generation and energy trading unit Uniper had derisked its long-term gas supply contracts for the upcoming years.

    Germany, Europe's biggest gas market, is heavily reliant on supplies from Russia, which accounted for about 40 percent of German natural gas imports last year, while E.ON itself gets roughly a third of its gas needs from Gazprom.

    As a result of the agreement, E.ON now expects EBITDA of between 6.4 billion euros and 6.9 billion euros this year, compared with a previous target range of 6.0 billion to 6.5 billion euros announced earlier this month.

    Underlying net income, the source of E.ON's dividend, will reach between 1.5 billion and 1.9 billion euros, up from 1.2 billion to 1.6 billion.

    Shares in E.ON turned positive on the news and closed up 0.3 percent.

    E.ON has been active in Russia for decades, owning 9.9 gigawatts (GW) of electrical power-generating capacity and employing more than 5,000 staff in the country. The weak rouble led E.ON's core earnings in Russia to decline by 30 percent last year.

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    Go Big or Go Home: Cabot O&G Wells Average EUR of 27 Bcf

    The indefatigable Cabot Oil & Gas continues to improve efficiency, increase production and lower costs–all at the same time.

    Last week Cabot presented at the Soctia Howard Weil Energy Conference in New Orleans. What did Cabot have to say? They plan to complete 40 wells in the Marcellus this year and grow production slightly–up to 7% in 2016 over 2015.

    We also learn that the length of Cabot’s horizontal wells–their “laterals”–are getting longer, an average 7,000 feet long in 2016 vs. 5,900 feet in 2015.

    Perhaps most astonishing is that the average Cabot well is expected to see an average EUR (estimated ultimate recovery) of 27 billion cubic feet. How much is that? That’s enough natural gas that, if used to generate electricity, would power 656,000 homes for a whole year. From one well!

    Think about 40 new such wells going online this year. Collectively those 40 wells will end up providing enough energy for 26 million homes. Coming from one small county in northeastern PA.

    That is the awesome miracle of fracking for Marcellus Shale gas…

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    Sinopec Full-Year Profit of $5 Billion Beats Estimates

    China Petroleum & Chemical Corp. earnings beat analyst estimates as profit from turning crude oil into fuels offset the plunge in energy prices and more than $1 billion in writedowns by Asia’s biggest refiner.

    Net income last year fell 30 percent to 32.4 billion yuan ($5 billion) from 46.5 billion yuan, according to a statement to the Shanghai stock exchange. That compares with a 29.97 billion yuan mean of 19 analyst estimates compiled by Bloomberg. The company reported impairments of 8.8 billion yuan. Sales dropped 29 percent to 2.02 trillion yuan.

    “It’s got a defensive downstream business model, so the company actually benefited from the decline of oil prices,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Hong, said by phone. “If you compare earnings with PetroChina and Cnooc, Sinopec has done the best and will remain to be the most defensive oil stock.”

    While the collapse in prices has hammered producers -- the global benchmark Brent dropped to an average of about $54 a barrel last year from $99 the year before -- refiners have benefited as cheaper crude boosted profit margins. India’s Reliance Industries Ltd.’s earnings surged to the highest in eight years in the quarter ended December as lower feedstock costs supported gasoline and diesel margins.

    Refining, Chemicals Gains

    Operating income from refining at the Beijing-based company, known as Sinopec, rose to 20.96 billion yuan, flipping from a loss of 1.95 billion yuan the previous year. Chemicals gained 19.68 billion yuan from a loss of 2.18 billion yuan. Petroleum exploration and production lost 17.42 billion yuan, from a 47.06 billion yuan gain the year before.

    Refining helped cushion Sinopec from the profit tumbles felt by its state-owned rivals, PetroChina Co. and Cnooc Ltd., which both saw net income drop by at least 66 percent. The company slipped 1.5 percent to close at HK$4.72 in Hong Kong before the earnings were released, compared with a 0.1 percent gain in the city’s Hang Seng Index.

    Sinopec reported in January that oil and gas output fell for the first time in 16 years as a slump in domestic crude production outweighed record volumes of natural gas. The company is reducing costs by closing high-cost oilfields. Sinopec Shengli Oilfield, a production arm, shut down four oilfields for the first time in the unit’s 50-year history to cut losses amid the price plunge.

    Sinopec and its state-owned parent China Petrochemical Corp. faced “unprecedented pressure” on operations from falling oil prices, the company said in November. The company’s refining margin may receive a boost this year after China effectively created a price floor saying in January it wouldn’t adjust retail fuel prices as long as crude is below $40 a barrel.

    Chinese state giant Sinopec has cut back on its capital expenditure plans for this year as it braces itself for lower crude production, while chasing increased gas flows.

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    Iran Said to Attend April Doha Talks Without Joining Oil Freeze

    Iran will attend talks with fellow OPEC members and Russia in Qatar next month without joining their proposal to freeze crude oil production, according to a person familiar with the nation’s policy.

    Oil Minister Bijan Namdar Zanganeh will attend the discussions in Doha on April 17, said the person, who asked not to be identified as the talks are private. Iran will maintain its policy of regaining market share lost during years of sanctions so won’t accept limits on its output, the person said. Most OPEC members, including Saudi Arabia, have said they will go to the meeting.

    “By attending the freeze meeting, and yet still being able to say they managed to escape the freeze, Iran earns some brownie points with its domestic audience,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland.

    The proposal to cap production will help global markets gradually re-balance as rising demand whittles away a surplus, according to Saudi Arabia’s Oil Minister Ali al-Naimi. Brent crude, the international benchmark, has risen about 40 percent from 12-year low of $27.10 a barrel in January. Zanganeh dismissed any freeze agreement that would apply to Iran as “ridiculous” because the nation aims to revive production after nuclear sanctions were lifted in January.

    With Iran’s attendance, that means all 13 members of the Organization of Petroleum Exporting Countries except Libya are scheduled to take part.
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    Russian minister says Rosneft set to lower oil output

    Rosneft is set to lower oil output, Russian Natural Resources Minister Sergei Donskoi said on Tuesday, ahead of a meeting of leading global oil producers in Doha on April 17 to discuss an output freeze to support weak oil prices.

    Russia, Saudi Arabia, Qatar and Venezuela are keen to prop up falling oil prices, which have fallen almost two thirds from a peak in June 2014. These countries have said they are ready to freeze production at January levels if other producers do the same.

    Qatar has invited all OPEC members and other major producers to attend the Doha talks next month on a deal to freeze output.

    Asked to comment on how a global oil production freeze would impact Russia, Donskoi said Russia's energy firms had adjusted their production plans: "Rosneft, as it told (us), is planning to lower (output)".

    Rosneft, Russia's biggest oil producer, has been producing at the pace of around 3.8 million barrels per day (bpd), more than a third of Russia's total 10.88 million bpd, one of the world's highest.

    Earlier this month, industry sources told Reuters that the company floated the idea of a domestic production cut to balance the global market and as it faces a natural decline this year.

    Donskoi said Lukoil, which is not state-owned, did not plan to decrease production as yet. The minister also said he hoped that state-controlled Rosneft would resume drilling for oil in the Arctic next year after having no plans to do that this year.

    Rosneft suspended Arctic drilling in 2014 after its partner ExxonMobil withdrew from the Kara Sea project because of Western sanctions imposed on Moscow over its role in the conflict in eastern Ukraine.

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    Ecopetrol seeks $2 bln from CB&I on refinery costs

    Colombia's state oil company Ecopetrol will seek $2 billion in damages from contractor Chicago Bridge & Iron Company for additional costs during the renovation of Colombia's Reficar refinery, Ecopetrol said late on Monday.

    Ecopetrol has said bad management at CB&I increased spending on the project by $4 billion, double the original $3.99 billion price tag. Ecopetrol said it filed the suit against CB&I before the International Chamber of Commerce.

    CB&I was not immediately available for comment by telephone.

    The Reficar refinery, part of Ecopetrol's operations near the northern coast of Colombia, reopened late last year after a multi-billion overhaul meant to more than double capacity to 165,000 barrels per day.
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    Total triples power of supercomputer in search for savings

    Total has tripled the power of its Pangea supercomputer, making it one of the world's most powerful and helping the French oil and gas company to speed up exploration studies and cut costs amid low oil prices.

    The computing power of the Pangea has been increased to 6.7 petaflops from 2.3 previously, Total said on Tuesday, the equivalent of around 80,000 laptops combined and making it the most powerful in the oil and gas sector.

    A prolonged fall in oil prices since mid-2014 has pushed companies in the sector to look for new ways to cut costs and make savings as they reduce investments.

    "This power will help us to improve our performance and to reduce our costs," said Arnaud Breuillac, Total's exploration and production president. "In the era of big data, state-of-the-art data-intensive computing is a competitive advantage."

    Total did not say how much the upgrade cost, nor how much it expected to save.

    The supercomputer at Total's research centre in the southwestern French city of Pau was designed by California-based Silicon Graphics International.

    According to, which ranks supercomputers twice a year, Tianhe-2 in the National Super Computer Center in Guangzhou, China, is the world's most powerful at over 33 petaflops.
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    Hedge funds establish near-record bullish bet on rising oil prices

    Hedge funds and other money managers have amassed a near-record number of bullish bets on increasing oil prices, helping push the main international benchmark well above $40 per barrel.

    By the close of business on March 22, money managers held a net long position equivalent to almost 579 million barrels in the three largest crude oil futures and options contracts .

    Hedge funds have more than doubled their net long position from just 242 million barrels at the end of last year, according to an analysis of data published by regulators and exchanges.

    The net long position has passed the previous peak of 572 million barrels, set in May 2015, and is closing in on the record of 626 million, set in June 2014, when Islamic State fighters were racing across northern Iraq.

    Hedge funds have established a record net long position in Brent crude futures and options traded on ICE Futures Europe equivalent to 364 million barrels of oil (

    At the same time, hedge fund managers have largely closed out their previous record short position in U.S. oil futures and options and started to accumulate long positions instead.

    Combined WTI short positions on the New York Mercantile Exchange and ICE Futures Europe have been cut from 261 million barrels at the start of February to 112 million barrels.

    The net long position in WTI has surged from just 60 million barrels in early February to 215 million barrels on March 22 (

    The accumulation of a near-record net long position has coincided with a sharp rise in oil prices, with U.S. crude up from $26 per barrel to more than $41, and Brent up from $30 to $42.

    The closing out of the previous record short position in U.S. crude futures and options has been accompanied by a predictable short-covering rally.

    There has been a close correspondence between hedge fund positions and the movement of oil prices since early 2014 (

    Just as record shorting of U.S. crude futures and options helped push oil prices to multi-year lows below $30 per barrel in January and February, so the unwinding of those positions has sent prices sharply higher.

    This is the third time that hedge funds have established a large short position and then unwound it since the start of 2015 and each cycle has ended with a sharp short-covering rally (

    But the current short-covering rally now appears over with hedge funds now fully exited from the record short position established since October 2015.

    With the hedge funds switched from a record short position to a near-record long one, the balance of risks in the market has shifted to the downside.

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    ONGC approves $5B worth field development plan (India)

    India’s Oil and Natural Gas Corporation (ONGC) has approved the Field Development Plan (FDP) for the development of fields falling under Cluster 2 of the deepwater block KG-DWN-98/2, in the Krishna-Godawari Basin offshore India, with plans to complete the project in 2020.

    According to the company, the development would involve a capital expenditure of $5.076 billion.

    The field will be developed with one gas process platform with a bridge connected living quarters platform for processing gas from free gas wells, FPSO for processing, storage and evacuation of oil/ gas from Cluster 2A fields, about 430 km subsea pipelines of various sizes from 6” to 22”, about 151 km umbilical and 10 manifolds, riser base manifolds and onshore gas handling terminal.

    In addition, drilling and completion of 35 wells have been planned. Out of those 35 wells, 15 will be oil producers, 12 water Injection, and 8 free gas producers.

    Production of first gas is planned by June 2019, first oil by March 2020, with overall completion in June 2020.

    Cluster 2 of the Block has been divided into two parts, Cluster 2A which has estimated in-place reserves of 94.26 MMt of crude oil and 21.75 BCM of associated gas; and Cluster 2B, which has estimated in-place reserves of Free Gas of 51.98 BCM.

    ONGC said that peak oil rate would be 77,305 bopd and 3.81 MMSCMD of associated gas through 15 producer wells along with 12 water injection wells with a peak water injection rate of 9,400 m3/d from Cluster 2A oil fields. Peak production rate of free gas is envisaged at 12.75 MMSCMD from 8 wells of Cluster-2B free gas fields.

    Further, total oil and gas production planned is 23.526 MMt and 50.706 BCM respectively during the project life from the Cluster 2. The peak daily production rate from the Cluster 2 works out to 16.89% and 27.60% of ONGC’s current production rate of crude oil and natural gas, respectively.
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    China crude oil stockpile up 1.08 pct, gasoline drops diesel surges

    China's commercial crude oil stocks increased 1.08 percent in February over January, while stocks of refined oil products went up 17.34 percent, data monitored by Xinhua News Agency showed on Monday.

    Last month, China imported 31.72 million tonnes of crude oil, according to the report.

    Gasoline stocks dropped 7.23 percent as the travelling peak during the China New Year holiday fueled demand. Diesel stocks increased 38.26 percent due to factories shutting down during the holiday, according to the report.

    Kerosene stocks gained 7.51 percent, said the report.
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    ExxonMobil 'eyes Eni Mozambique stake'

    US supermajor ExxonMobil is looking to take a sizeable stake in Italian operator Eni’s Area 4 gas-rich acreage off Mozambique, according to a report.

    The Irving, Texas-based giant is in talks about taking a 15% slice in the asset, Reuters reported, but may even have an interest in taking Eni’s entire 50% stake.

    Two unidentified sources said ExxonMobil was eyeing the 15% stake, with another source indicating to the news wire that it was interest in the whole 50% stakes, while yet another source said ExxonMobil was interested in other Eni assets.

    Eni has already said it wants to shed some of its interest in the Rovuma basin play, with stake sales in Congo-Brazzaville an even perhaps Egypt also on the cards.

    Eni said in mid-March that it was looking to dispose of €7 billion ($7.9 billion) worth of assets by 2019, mainly through the sale of stakes in new discoveries. Under its new 2016-2019 business plan, Eni is also eyeing capital expenditure cuts “to fulfil short term constraints”. While the group’s capex will be reduced by 21% to €37 billion, upstream spending will drop by 18%.

    Eni is keen to take a final investment decision on its Coral floating liquefied natural gas project in Area 4 within a few months.

    The company is also targeting more FLNG vessels on the field and is working on sanctioning its Mamba onshore LNG scheme in Area 4, perhaps in late 2017.

    First gas is set to flow from Coral in 2021, while Mamba could be online a year or more later.

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    Asian VLCC freight rate drops 39% on week on muted demand

    Worldscale rates on key Asian Very Large Crude Carriers routes fell sharply this week due to the easing of delays at China's oil receiving ports coupled with charterers resorting to the strategy of drip feeding the market with cargoes, said sources Thursday.

    Rates on the key VLCC Persian Gulf-to-Japan route fell 39 Worldscale points week on week to w61 basis 265,000 mt Thursday.

    "The market has moved back after the abnormally high rates [for this season]. Spring is the maintenance season for Asian refineries so demand should not be strong," said a North Asia-based charterer.

    It was a roller-coaster VLCC market this month with the key PG-Japan rate rising from the year's low of w50.5 at the start of the month to w102 in mid-March due to firm demand for cargoes loading in late March and tight supply from various port delays.

    Sources said that for VLCC cargoes loading after April 5, vessel availability was no longer tight with port delays in China falling to five or six days from a waiting period of two weeks.

    Demand for vessels has also returned to the typical levels with 38 cargoes fixed for the first decade of April.

    The lowest fixture rate seen this week was S-Oil having placed the Kalymnos on subjects for a Ras Tanura-Onsan voyage, loading April 12-14, at w57 basis 280,000 mt. Sources said this was a discounted rate as the Kalymnos was a 2000-built vessel.

    Market sources said rates were expected to bottom out as levels approached the low of the year -- w50.5 -- last seen on March 3, showed Platts data.

    "The market is approaching the bottom, [competitive] owners are disappearing and the available ships on the list are mainly handled by strong owners. However I don't believe there is any rebound [as the fundamental supply is more than demand]," said a South Korea-based charterer.

    Charterers were expected to "cherry pick" re-let vessels and hold back until next week to charter for the remaining cargoes loading in the second decade of April, said a broker.
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    Israeli court blocks government's natural gas plan in blow to energy firms

    Israel's Supreme Court blocked a controversial plan to develop the country's natural gas fields on Sunday, dealing a blow to energy companies operating in the eastern Mediterranean and drawing fire from the government.

    Prime Minister Benjamin Netanyahu reached a deal last year with Texas-based Noble Energy  and Israel's Delek Group that would leave them in control of the country's largest gas field, Leviathan, while forcing them to sell smaller, yet sizeable, assets.

    The agreement also provided an outline for the next decade, with the government committing to leave taxes, export quotas and other regulation unchanged, and the companies agreeing to develop Leviathan at an accelerated pace.

    The court, however, said the government was not in a position to make such long-term commitments.

    A commitment "that binds the government to the outline, including no changes in legislation and opposing legislative initiatives for 10 years - cannot stand," the court said in its ruling.

    The cabinet could try to pass a law in parliament, the judges said, but given the strong opposition and Netanyahu's single-seat majority, such a move seemed unlikely.

    The court gave the government a year to come up with an alternative arrangement or the outline will be cancelled.

    "The decision severely threatens the development of the gas reserves of the state of Israel," Netanyahu said of perhaps his biggest political setback since re-election a year ago.

    The prime minister even made the unusual step of defending the deal in the Supreme Court last month. [L8N15T06I]

    "Israel is seen as a state with excessive judicial interference in which it is difficult to dobusiness," he said. "We will seek other ways to overcome the severe damage that this curious decision has caused the Israeli economy."

    Noble and Delek have held off on developing Leviathan, a $5-$6 billion investment, until the deal was approved.

    In a joint statement, they commended the court for opposing just one section of the outline.

    "In order to allow us to meet the framework goals, primarily the development of Leviathan by the end of 2019, we call on the government to facilitate the stability provisions in a short time frame," the companies said.

    The deal would have also encouraged new energy companies who have been waiting for regulatory uncertainty to clear up before investing in exploration.

    However, it also drew a lot of opposition including from public advocacy groups and opposition lawmakers, who said it would still have left Noble and Delek in control of too much of Israel's gas.

    "The bottom line is that it's bad news for the partners, but in our estimation, and given the sensitivities of the subject, the last word has yet to be spoken," he said.

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    US Oil rig count falls by 15

    The US oil rig count fell 15 to 372 this week, according to driller Baker Hughes.

    It's the lowest total since the week of November 13, 2009.

    The gas rig count rose by 3 to 92 this week, taking the total tally down 12 to 464.

    Last week, the tally of oil rigs rose for the first time in 13 weeks, by one. The combined count of oil and gas rigs fell to another record low, as five gas rigs were turned off.

    We got the data one day early because of Good Friday.

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    Iran's oil storage struggle holds back exports to Europe

    Iranian oil flows to Europe have begun to pick up from a slow start after sanctions were lifted in January, but trading sources say a lack of access to storage part-owned by Tehran's Gulf Arab rivals now looms large on a list of obstacles.

    European countries accounted for more than a third of Iran's exports, or 800,000 barrels a day, before the European Union imposed sanctions in 2012 over its nuclear programme.

    Since January, Tehran has sold 11 million barrels to France's Total, 2 million barrels to Spain's Cepsa and 1 million to Russia's Litasco, according to Iranian officials, traders and ship-tracking data. Some of these cargoes will not arrive in Europe before mid-April.

    With most U.S. sanctions still in place, there is no dollar clearing, no established mechanism for non-dollar sales and banks are reluctant to provide letters of credit to facilitate trade.

    A new initiative by international ship insurers has helped, but traders say exports have been hampered by Iran's unwillingness to sweeten terms for potential European buyers.

    Iranian oil officials and international traders have also grown increasingly concerned by a delay regaining access to storage tanks in Egypt's port of Sidi Kerir on the Mediterranean coast, from where it supplied up to 200,000 bpd to Europe back in 2011.

    "As of now, there is no tankage for Iran there. Before sanctions, it was Iran's main terminal for supplies to Western nations," one Iranian oil source said.

    Four traders with western oil majors and major trading houses told Reuters Iranian officials have notified them Iran cannot get access to the SUMED-owned terminal for now and so could not supply them with crude from there.

    Sidi Kerir, which connects to the Red Sea via pipelines also owned by SUMED (Arab Petroleum Pipelines Company) allows Iran to deliver oil much more quickly than if it goes by ship from Iran's Kharg Island terminal, which takes nearly a month.

    As global crude output has outpaced consumption, storage space has become increasingly prized, in sharp contrast with 2011, when Iran could lease tanks in Sidi Kerir and the world struggled to produce enough oil to meet demand.

    SUMED is half owned by state-run oil company Egyptian General Petroleum Corp. The other half is owned by Kuwait, the United Arab Emirates, Qatar and Iran's arch rival Saudi Arabia, with which it is vying for influence across Middle East.

    "There is competition for market share and they don't want Iran to lease storage there. Of course, not having storage will hurt Iran's exports to Europe," the Iranian source said, adding he still hoped to gain access to some storage in April.

    OPEC Gulf members led by Saudi Arabia have repeatedly said they are looking to protect and expand their footprint in key Asian, European and U.S. oil markets, where they have lost out in the past few years because of a boom in non-OPEC supply.

    Iran, OPEC's third largest producer, has said it hopes to overcome most of the financial, legal and logistical obstacles it has faced this month, but shipping data suggest the path is far from smooth.

    Some 45-50 million barrels of Iran's oil are estimated to be held in tankers at sea, barely changed from the amounts thought to be in floating storage before sanctions were lifted at the start of the year.

    A tanker with one million barrels of Iranian crude, the Distya Akula, has been anchored off Suez since Feb. 24, as Iran has been unable to find a buyer, traders said.

    They also said Greece's Hellenic Petroleum, a major buyer of Iranian oil prior to sanctions, has been unable to secure financing for deliveries and has yet to restart purchasing oil.

    Several trading sources said Hellenic would now rely on Total to ship Iranian oil.

    Hellenic said the company had an agreement with Iran on Jan. 22 for the payment of 2011-2012 crude oil purchases that was subject to compliance with international rules and banking regulations, but did not comment on any recent developments.

    An Iranian official said on Tuesday exports had risen by 900,000 barrels per day to 2.2 million bpd in the past two months.

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    Aramco starts up at Kasbah

    Saudi Arabian state oil giant Saudi Aramco has started up its Kasbah offshore sour gas project in the Persian Gulf.
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    Saudi losing market share.

    Saudi Arabia lost market share in more than half of the most important countries it sold crude to in the past three years, even as the kingdom increased output to record levels.

    Image title

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    Maple Syrup vs Natural Gas

    A federal judge could hold a Pennsylvania family that runs a maple syrup business in contempt of court on Feb. 19 if it persists in blocking crews from felling a grove of trees to make way for a new shale gas pipeline that would cross its property.

    The defendants and their supporters, who first confronted chainsaw crews on Feb. 10, face arrest if they again interfere, U.S. District Court Judge Malachy Mannion in Scranton warned earlier this week.

    The $875 million Continental Pipeline, due to be operational this autumn, would run 124 miles (200 km) from Montrose, Pa., to Albany, N.Y., and bring gas from Pennsylvania fracking wells to the New York and New England markets.

    "We're trying to keep them from cutting trees before they have all the permits they need to build in New York state," said Megan Holleran, spokeswoman for North Harford Maple, a family-run syrup business in New Milford, Pa.

    Christopher Stockton, a Constitution spokesman, acknowledged the company does not have all the permits needed to finish the New York portion of the pipeline but said it expected to receive them.

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    $9bn in E&P equity ytd.

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    Oil charts: Summary.

    Image titleImage titleUS demand responds to price. (Wish we could say the same of emerging!)
    Image titleEIA expectation on the US shales. Too pessimistic?
    Image titleCrude supply contracting now
    Image titleStorage cliff.

    Initial frac jobs were just 3,000 foot laterals with just 5 stages. Water and proppant volumes were a fraction of what it is today. Although less complicated, costs were significantly higher. These very small jobs took much longer than complex well designs of today. Many thought unconventional liquids production wouldn't be economic for decades, but costs decreased. Without high oil prices, the exploration phase would have been much slower.
    Image title
    Shale's sorted by the bond market!

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    Seadrill extension: $58k a marginal day?

    Seadrill's (NYSE: SDRLlatest contract attracted a lot of attention here on SA. Fellow contributor Fun Trading stated that the new contract or contract extension was a positive and should be celebrated. On the contrary, Henrik Alex called the contract a disaster for the industry.

    I recently applied the lower-for-longer day rate scenario for Seadrill and used day rates of $250,000 for semis and drillships. Now, with this new and important piece of information, it's time to reevaluate my previous thoughts.

    So, what was the day rate for West Tellus?

    There are two ways how you may look at the problem. The first one is to calculate the reduced day rate for the previous contract and the new day rate for the contract extension. You will get a day rate of $300,000.

    The second way to evaluate the contract is to divide the net effect on the backlog on the number of added working days, which will leave the previous day rate intact but the new day rate will be roughly $58,000. The numbers are very different and the reaction is also different depending on which method you use.

    Naturally, bulls will point to the $300,000-day rate and tell that this was a win for Seadrill. After all, this day rate is above bearish expectations for this part of the industry cycle. Bears will point to the day rate of $58,000 - a number that does not require much commentary. In my view, the correct answer depends on what question you ask.

    If you are interested in what exact day rate Seadrill got for an extension of the contract - the day rate is $58,000. The company had a contract in place with a good day rate, but decided to prolong the contract at the expense of the day rate.

    Why did Seadrill sign the contract?

    At first glance, the contract makes no sense at all. Why go for a blend and extend contract if your additional day rate is $58,000 and you lock your rig for 18 months? If we assume stacking costs of around $35,000 per day and operating costs of $130,000 (I think I'm using rather optimistic numbers), the rig would have been better off waiting for a new job. Under current contract, West Tellus will be losing $72,000 per day instead of losing $35,000 per day if it were warm stacked.

    The difference between two options is $37,000 per day, which accrues to $20.3 million over the 18-month period. Even if stack costs are higher for West Tellus, the decision still makes no sense. After all, the rig would have had 18 months to get a new job. The initial contract ended in April 2018, so the rig had time to search for the job up until 2020 before the decision to stack would bring more losses than the decision to extend the contract. Is Seadrill so bearish on the industry that it does not believe that West Tellus will be able to find work until 2020 after it finished working for Petrobras (NYSE: PBR)?

    In my view (and this is speculation, of course), Petrobras threatened to cancel the existing contract and the terms of cancellation were not favorable to Seadrill. This is the only possible logical explanation why Seadrill agreed to this losing blend and extend deal. Otherwise, Seadrill's actions make no sense at all.

    The previous contract was a disaster, but the new one is a full-blown Armageddon. The worse scenario would be to work for Petrobras for free. The news is bearish for both Seadrill and the industry. I expect that we will see similar renegotiations in the future.

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    The DUC's come online

    U.S. drillers are springing open dormant oil wells they drilled but have left untapped since last year, trying to shore up cash they desperately need after a long and brutal downturn.

    It could be the first small tremor of a long-awaited comeback in industry activity, or it could be an early start of another premature ramp-up that, like the failed restart in the summer of 2015, could upset the delicate oil supply correction that's supposed to help lift prices later this year.

    After a recent oil price rally, deep cost-cutting and technological breakthroughs, many oil companies can now afford to pump crude from their large backlog of wells. That's one reason some U.S. oil production expected to vanish this year could be "switched back on" if oil prices keep rising, said Neil Atkinson, head of the oil market division at the International Energy Agency in Paris.

    "But what's the lag time between companies saying, 'Hey, we're back in business,' and then actually producing oil? Is it six months? Is it nine months?" Atkinson said. "This is uncharted territory."


    • Rigs stacked along Business 20 west of FM 1788 photographed Tuesday, Feb. 24, 2015.James Durbin/Reporter-TelegramOil companies finally tapping long-dormant shale wells

    The speed of the U.S. oil industry's inevitable resurrection after the worst oil bust in decades is at the center of a new debate in the energy world, with some analysts arguing if an oil price recovery arrives before crude stops pouring into storage tanks, domestic drillers could start pumping more oil and cause prices to fall back down. The rally hit a bump this past week, with U.S. crude declining to $39.46 a barrel on Thursday, but it is still well above last month's average of about $30 a barrel.

    Others say the downturn has left the industry's finances in tatters, depleted its oil field crews and equipment, and it would take far too long for drillers to stop a sharp decline in U.S. oil production this year. The thinking goes if it's too late to stop the output drop, then the industry can return to the oil patch without fear of interrupting the realignment of supply and demand.

    There are early signs U.S. companies are trying to test that theory. Last month, oil companies brought 12 wells into production for every 10 they began to drill, which indicates they are reducing their backlog of so-called drilled-but-uncompleted wells faster than they're drilling new wells for the first time in five months, according to consulting firm Rystad Energy in Norway.

    "It's very marginal, but it still is an increase. It could be the early signs of a recovery, but it's too early to say," said Bielenis Villanueva Triana, a senior analyst at Rystad. The industry's forecasts for U.S. oil production are "very sensitive to the drilled-but-uncompleted wells, but there's definitely going to be a decrease" in overall U.S. production this year.

    Anadarko Petroleum Corp., EOG Resources and other U.S. companies have said since last year they have drilled hundreds of wells but left the crude underground, and could bring them online within two to three months in an oil price recovery.

    Above break-even

    Drawing on two data snapshots, one from mid-2015 and the other from earlier this year, energy research firm Wood Mackenzie estimates oil companies have uncorked about 400 of more than 1,400 uncompleted oil wells since September in Texas' Eagle Ford Shale, Wolfcamp and Bone Spring plays and North Dakota's Bakken Shale, though oil companies still added to their backlog of uncompleted wells because many drilling rigs were still on contract.

    The firm says climbing oil prices have recently pushed above break-even costs in North Dakota and Texas to complete wells, which could prompt operators to complete another 440 wells in those regions over the next six months, with the oil production from those wells peaking at 250,000 to 300,000 barrels a day in November or December.

    Several U.S. producers have told investors they plan to draw down their inventory of dormant wells this year, including Pioneer Natural Resources, Cabot Oil & Gas, Oasis Petroleum, Chesapeake Energy Corp., Hess Corp. and RSP Permian, according to Wood Mackenzie. Whiting Petroleum had said it would pump more crude from its backlog of wells if oil prices landed between $40 and $45 a barrel, and that generally holds true for many of the more aggressive operators, analysts say. The companies could not be reached for comment.

    "At $40 oil, you'll definitely see an acceleration of wells being completed and more activity coming back," said Maria Cortez, an analyst at Wood Mackenzie. "It's the more financially attractive option for (some of) these operators."

    Hess Corp. expects to drill and complete 50 wells and finish another 30 that have been waiting to be completed this year.

    "We are in a really good position in the Bakken," said John Roper, a spokesman for Hess. "Because we have such prime leases, we're able to focus on those."

    Tapping that inventory of wells is one of three major levers that U.S. oil companies can pull to restart activity. One other lever is hedging, which allows companies to lock in higher prices for the oil they produce, and it has already been pulled. Earlier this month, net short positions among producers - oil hedging - reached the highest point ever recorded by the U.S. Commodity Futures Trading Commission, which has tracked those numbers for about a decade.

    The bulk of producer hedges are done between oil companies and banks and aren't recorded by the CFTC, but those trades typically track closely with the public data, and there has been a substantial increase in recent weeks, said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. Drillers are hedging at current prices because they can lock in mid-$40 oil prices for production in coming months or more than a year out, he said.

    ~Houston Chronicle.

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    Alternative Energy

    Vestas breaks first-quarter order record with U.S., China and Spain deals

    Wind turbine maker Vestas has secured three turbine orders to bring this year's total intake to 1,806 megawatts (MW), the highest ever in a first quarter and continuing a strong trend from 2015.

    The Danish company is market leader in an industry benefiting from a new focus on renewable energy generation, encouraged by the Paris global climate summit last year, as well as the extension of a key U.S. tax credit.

    "We still expect an order intake of 7,500 MW this year, but the solid start to the year creates a much stronger foundation for positive surprises in the remainder of the year," Sydbank analyst Jacob Pedersen said in a note to clients on Friday.

    Last year Vestas received orders for 1,750 MW in the first quarter, including 418 MW of smaller orders which are not disclosed continuously but in the quarterly earnings report. Vestas's first-quarter report is expected on April 29.

    Vestas said late on Thursday it had received a 200 MW contract in the United States as well as 48 MW and 27 MW orders in China and Spain respectively. In February the company received a 1,000 MW order in Norway.

    Vestas received orders to build turbines with a total capacity of 8,943 megawatts (MW) last year, beating its previous record of 8,673 MW in 2010.

    "We see support for continued high order intake in 2016, which seems to be a key concern in the market," Danske Bank said in a note.

    Vestas is the world's largest wind turbine maker but would be pushed off that pedestal if rivals Siemens and Gamesa go through with a planned merger.

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    China's Hanergy posts $1.6 bln loss after troubled year

    Chinese solar panel maker Hanergy Thin Film Power Group Ltd posted a HK$12.23 billion ($1.58 billion) loss in 2015, after a tumultuous year in which the Hong Kong securities regulator launched a probe into the firm.

    Full-year revenue for 2015 fell more than 70 percent to HK$2.81 billion, the firm said in a filing to the Hong Kong stock exchange late on Thursday. The net loss compared with a HK$3.2 billion profit a year earlier.

    Shares in Hanergy Thin Film tumbled nearly 50 percent in only a few minutes last May on news that it was under investigation by Hong Kong's market watchdog. Before the crash, the firm's stock had staged a spectacular five-fold rally over nine months.

    Hanergy said on Thursday the ongoing investigation by the Securities and Futures Commission (SFC) had had a significant affect on its business and it was seeking legal advice to address the watchdog's concerns. The firm aimed to resume trading, which was suspended last May, as soon as possible.

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    IEA optimistic on China's switch to renewables

    China is very likely to meet the target of having 15 percent of its energy demand coming from renewables by 2020, said the head of the International Energy Agency.

    Fatih Birol, executive director of the Paris-based IEA, said on Wednesday that he doesn't see any reason for China to fail to reach the target as long as the country's push for renewable energy continues.

    "China has made some major moves in energy transition. It is No 1 in wind energy production, No 1 in solar energy production and No 1 in hydropower energy," Birol told China Daily in an exclusive interview in Beijing.

    "At the same time, its coal consumption declines. China last year was the champion of the world in terms of reducing carbon emissions," he said.

    According to a projection made on Wednesday by Sun Longde, vice-president of PetroChina Co, China's energy consumption is expected to peak in 2035 as its economy rebalances.

    Birol didn't project on which source of energy will play major role in China' s energy mix in the long run as he sees the country is diversifying its energy mix and making its energy system more efficient at the same time.

    "We will see more renewable energy, more natural gas, more nuclear power, and less coal in China," he said, adding that the Chinese government's determination is crucial because the low price of oil and natural gas may complicate the growth of renewable energy worldwide.

    Birol, who came to Beijing to attend a ceremony marking the 20th anniversary of China-IEA Engagement, announced on Wednesday that the IEA and China's National Energy Administration started the process of the establishment of a joint energy cooperation center in Beijing.

    The IEA-China Energy Cooperation Center will help China access energy-related advice and share the IEA's expertise in energy.

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    Britain's greenhouse gas emissions fell 3.3 pct in 2015 - govt

    Britain's greenhouse gas (GHG) emissions fell by 3.3 percent in 2015, largely due to a decline in coal-fired power generation and marking the third straight yearly drop, preliminary government data showed on Thursday.

    Output of the heat-trapping gases in Europe's second-largest emitter behind Germany fell to 497.2 million tonnes of carbon dioxide equivalent (CO2e), from 514.4 million tonnes in 2014, the Department of Energy and Climate Change said.

    Emissions of carbon dioxide (CO2), the main greenhouse gas blamed for climate change, dropped 4 percent to 405 million tonnes.

    The fall stemmed largely from a drop in energy-sector emissions. Those fell 13 percent to 136 million tonnes of CO2e as low-carbon electricity production from renewable and nuclear power plants rose and carbon-intensive coal generation fell.

    Data released by the government last month showed coal-fired generation fell 24 percent last year while nuclear generation rose by 10 percent and wind generation by 24 percent.

    Thursday's data shows Britain's GHG emissions have fallen 38 percent since 1990, and dropped for a third consecutive year.

    Britain has a legally binding target to cut its GHG emissions by 2050 to 80 percent below 1990 levels and has set out five yearly carbon budgets towards meeting this goal.

    The country is on track to achieve the cuts needed to meet the second and third carbon budgets to 2022 but the government has said it risks missing the fourth, 2023-27 budget, which needs a reduction of 50 percent by 2025.

    Last November the government announced plans to close polluting coal-fired power plants and replace them with gas plants by 2025, but industry experts have warned the new plants are not being built quickly enough.

    They also warned that a decision last year to cancel a 1 billion pound ($1.44 billion) project to help fund technology to capture CO2 emissions and store them underground would make meeting the climate target more difficult.

    The bulk of Britain's emissions, some 27 percent, came from energy supply, followed by transport at 23 percent, business at 14 percent and residential at 13 percent. The rest came from sectors including agriculture and waste management.
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    Two arrested in REE investment scam.

    Officers from Plymouth Financial Investigation Unit (FIU) launched Operation Stagecoach after a Plymouth police officer made a routine visit to a man in his 80s on a completely separate matter earlier this year.

    The officer became concerned when she learned the man was about to invest a five figure sum in a scheme. She passed on her concerns to detectives from FIU who initially contacted the City of London Police.

    FIU officers from Plymouth have since taken the lead in the investigation which is understood to involve hundreds, possibly even thousands, of people across the UK, the majority of whom police say are elderly.

    The team are also now working with officers from Trading Standards and sources suggest the scale of the suspected fraud involves more than £20m.

    Police have said the suspected fraud involves people being ‘cold called’ and persuaded to invest substantial amounts of money in rare earth metal oxides.

    The alleged fraud centres around the true value of the items invested in.

    A 33-year-old man and a 39-year-old woman – both from Sandhurst in Wiltshire – were arrested by FIU detectives earlier this month on suspicion of fraud. They have been released on police bail until July 4, pending further inquiries.

    In addition, FIU officers recently executed a search warrant on offices at Canary Wharf, London believed to be connected with a company which sells investments.

    Read more: 
    Follow us: @heraldnewslive on Twitter | theplymouthherald on Facebook

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    China’s State Grid Envisions Global Wind-and-Sun Power Network

    China’s State Grid Corp. already dominates its home market, operating most of the electricity grid that powers the world’s second-largest economy. Now it has big plans for the world: a $50 trillion global power network that harnesses Arctic winds and equatorial sunlight. As WSJ’s Brian Spegele reports:

    State Grid Chairman Liu Zhenya outlined his company’s vision Wednesday, saying a new global electricity network is the world’s best bet for overcoming resource scarcity, and limiting the effects of pollution and climate change. Knitted together by new, efficient, long-range transmission lines, the world grid, he said, could be running by 2050 and would tap advanced technology for renewable solar and wind resources.

    “This is the right thing to do to benefit all the people of the world,” Mr. Liu said at a media briefing during an international symposium on the project.

    Unaddressed by Mr. Liu were who would pay for one of the biggest infrastructure projects ever attempted and whether foreign governments would trust a Chinese company to lead development of a critical utility. The $50 trillion estimated price is nearly twice the economic output of the U.S. and China combined. State Grid is using and developing long-range transmission technologies, making the project in some respects a buzz-generating marketing campaign for the company.
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    Tesla Model 3 Electric Car Seen Getting 225 Miles Per Charge

    When Tesla Motors Inc. unveils its Model 3 on today, the world will see the more affordable electric sedan that has been part of the company’s “master plan” for a decade.

    It’s not just a new car. It’s a new vehicle platform, giving Tesla the flexibility to add new bodies with relative ease. The company has said the Model 3 will include a sedan and will also be the basis for a crossover sport utility vehicle. Chief Executive Officer Elon Musk has also talked about his desire to build a pickup at some point.

    Sam Jaffe, an analyst at Cairn Energy Research Advisors, predicts in a report for clients on Wednesday that the Model 3 will have a 65 kilowatt-hour battery pack and a range per charge of about 225 miles (362 kilometers). Measured as kilowatt hours per kilogram or liter, the “energy density” of a battery determines range: The more watt hours, the more miles a vehicle can travel on a charge. High energy density at low cost is the holy grail of the battery industry, and Jaffe said he expects the new cells in the Model 3 will have roughly 35 percent more energy than each cell in Tesla’s Model S and Model X.

    Jaffe also said car sharing will become a significant part of Tesla’s business model in the coming years, in part because of autonomous driving features like “summon mode,” which lets the car on its own travel at low speed from a parking spot to it owner. If that ability could be expanded to entire neighborhoods, a fleet vehicle could hover nearby and be sent on demand.

    “Tesla Motors will become a major player in the car-sharing market,” Jaffe said in the report, noting that the company “controls both the vehicle technology and has the software development capabilities to control the software platform that would be at the heart of such a service.”

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    The Two Most Striking Charts in the Megacaps.

    Image titleFirst Solar.

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    Mexico First Power Auction Awards 1,720 Megawatts of Wind, Solar

    Renewable energy developers won contracts to produce 1,720 megawatts of power in Mexico during the country’s first-ever private auction, after the government ended a decades-long state electricity monopoly in 2013.

    Seven wind and solar companies including Enel Green Power, SunPower Systems Mexico and Recurrent Energy won 15-year contracts to rights to provide the state-owned Comision Federal de Electricidad with power beginning in 2018, Cesar Emiliano Hernandez, Mexico’s deputy electricity minister, said in Mexico City. The contracts are expected to generate more than $2.1 billion in investment by 2018, he said.

    “The results were better than some of the most successful auctions in the world,” Hernandez said in a press conference in Mexico City. “Many top level international companies competed and Mexico will receive a very important amount of investment.”

    Mexico is restructuring its energy markets in an effort to spur billions in investment after a historic overhaul approved in 2013 to open state-run monopolies in the oil and electricity industries. The government has set a goal of getting 35 percent of its energy from clean sources by 2024, up from 25 percent now.

    Eleven packages of wind and solar projects and certificates were sold at an average price of $41.80 per megawatt-hour. Prices for solar averaged $40.50 per megawatt-hour, while prices for wind averaged $43.90. Solar energy accounted for 1,100 megawatts sold, and 620 megawatts of wind projects were awarded long-term contracts.

    The auction met 84.66 percent of the state utility CFE’s demand. In order to buy the remaining power the company still needs, Mexico’s government will hold another power auction in April, said Hernandez.

    Clean-energy projects were able to sell more than 5 million 20-year clean-energy certificates. Large electricity consumers will buy the certificates to meet an obligation to get 5 percent of their energy from sustainable sources by 2018.

    Mexico is seeking to add 20 gigawatts of clean energy in the next 15 years, according to the National Electricity System Development Program released in June. The country has forecasted as much as $62.5 billion in private investment in the energy industry by 2018.

    “The auction was an important signal to Mexico’s energy market,” said Lilian Alves, a New Energy Finance analyst in Sao Paulo. “The government was able to buy a lot of capacity.”

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    SunEdison at risk of bankruptcy, unit says

    U.S. solar company SunEdison Inc is at "substantial risk" of bankruptcy, unit TerraForm Global Inc said, sending SunEdison's shares down 20 percent in premarket trading.

    TerraForm Global, citing SunEdison's liquidity issues, said it would join its parent and fellow SunEdison "yieldco" TerraForm Power Inc in delaying its annual report for the year ended Dec. 31. (

    TerraForm Global's annual report was due by March 30.

    However, TerraForm Global said it did not rely substantially on SunEdison for funding or liquidity and that it would have sufficient liquidity to support its operations even if its parent sought bankruptcy protection.

    The Wall Street Journal reported on Monday that the U.S. Securities and Exchange Commission was looking into SunEdison's disclosures to see if it exaggerated its liquidity last year when it said it had more than $1 billion in cash.

    SunEdison said on March 16 it had delayed filing its annual report for the second time after identifying "material weaknesses" in its financial reporting, which it said related primarily to problems with a newly implemented IT system.

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    New world record set in renewable energy investments

    Global investment in renewable energy capacity hit a new record in 2015 despite falling oil, gas and coal prices, says a UN-backed report.

    All investments in renewables, including early-stage technology and R&D as well as spending on new capacity, totalled $286 billion in 2015, some 3 per cent higher than the previous record in 2011, said the 10th edition of United Nations Environment Programme’s (UNEP) annual report — Global Trends in Renewable Energy Investment 2016.

    A total of 134 gigawatts (GW) of renewable power was added worldwide in 2015 compared to 106GW in 2014 and 87GW in 2013, the report said.

    It highlighted that the green investments has broadened out to a wider and wider array of developing countries, helped by sharply reduced costs and by the benefits of local power production over reliance on imported commodities.

    “Renewables are becoming ever more central to our low-carbon lifestyles, and the record-setting investments in 2015 are further proof of this trend. Importantly, for the first time in 2015, renewables in investments were higher in developing countries than developed,” said Achim Steiner, executive director at UNEP, in an official statement.

    In 2015, for the first time, investments in renewable energy in developing and emerging economy nations ($156 billion, up 19 per cent compared to 2014) surpassed those in developed countries ($130 billion, down eight per cent from 2014).

    Much of these record-breaking developing world investments took place in China (up 17 per cent to $102.9 billion, or 36 per cent of the world total).

    Other developing countries showing increased investment included India (up 22 per cent to $10.2 billion), South Africa (up 329 per cent to $4.5 billion), Mexico (up 105 per cent to $4 billion) and Chile (up 151 per cent to $3.4 billion).

    Among developed countries, investment in Europe was down 21 per cent, from $62 billion in 2014 to $48.8 billion in 2015, the continent’s lowest figure for nine years despite record investments in offshore wind projects.

    Investments in the US were up by 19 per cent to $44.1 billion, and in Japan investment was much the same as the previous year at $36.2 billion.

    The report was launched by the Frankfurt School-UNEP Collaborating Centre for Climate & amp; Sustainable Energy Finance and Bloomberg New Energy Finance (BNEF) on Thursday.

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    Scientists have found a way to recycle sunlight — and it could cause a solar power revolution

    The world of solar cells could be on the cusp of a revolution, as researchers seek to boost efficiency by harnessing the power to recycle light.

    A new study, published Thursday in the journal Science, considers the properties of hybrid lead halide perovskites, a group of materials already making waves in solar cell technology, and demonstrates their ability to absorb energy from the sun, create electric charge, and then churn out some light energy of their own.

    Moreover, the researchers demonstrated that such these cells can be produced cheaply, with easily synthesized materials, making the proposition much more commercially viable.

    “We already knew that these materials were good at absorbing light and producing charge-carriers,” says co-author Felix Deschler of Cambridge University, UK, in a telephone interview with The Christian Science Monitor. “But now we have demonstrated that they can also recombine to produce photons again.”

    Solar cells work by absorbing the light energy – photons – from the sun, converting this energy into electrical charge, and then conveying that charge to electrodes, which take the energy out into the power-hungry world.

    Hybrid lead halide perovskites were already known to do this task efficiently, but what Dr. Deschler and his team have demonstrated is an ability to do more: the perovskites are actually able to emit light themselves after creating charge – and then reabsorb that light energy.

    The result is a solar cell that acts like a concentrator, able to produce more energy – to boost the voltage obtained from a given amount of light – than would a cell made of materials without this recycling ability.

    “Why this is now a big thing is because the current record of photo cell efficiency rests at 20-21 percent, whereas the absolute limit is 33 percent,” says Deschler. “Our results suggest a route to achieve that limit.”

    The efficiency of a solar cell refers to the percentage of energy, given a certain amount of light, it can harness for use.

    According to a widely accepted 1961 paper by William Shockley and Hans Queisser, theoretical thermodynamics cap solar efficiency at 33 percent. It is simply impossible to do better, they argued.

    Yet the beauty of this most recent work is not only the hope of climbing closer to that theoretical ceiling, but the materials used to do so.

    “You wouldn’t expect photon recycling in our materials because their fabrication is so much simpler than others,” explains Deschler. “Our materials are very cheap to make, very versatile.”

    The reason for surprise, even skepticism, is founded in the way these materials are made – via solution. This affords little control over the way in which the structure forms.

    If you have impurities in a crystalline structure, you are left with a “defect site”, which makes the material “messier,” in terms of light absorption. Without such impurities, you have what is known as a “sharp absorption onset,” allowing efficient and clear absorption of the light.

    “So, while they are very efficient,” says Deschler, “we’re still trying to understand why and how they’re better than other materials.”

    The researchers expect considerable interest from solar cell producers looking for a cheaper, more efficient way to harness the power of the sun.

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    CSIQ #1 on valuerank.

    Image title

    The "ValueRank" ranking system is quite complex, and it is taking into account many factors like 5-year average yield, sales growth, trailing P/E, price to book, price to sales and return on equity, as shown in Portfolio123's chart below.

    Back-testing over sixteen years has proved that this ranking system is very useful. The reader can find the back-testing results of this ranking system in this article.

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    Atomic power key to China's energy security

    China, faced with growing energy demand, and ever harsher conditions pertaining to domestic resources and protecting the environment, as well as the challenges of global climate change, including the need to reduce greenhouse gas emissions, has to resolve a series of basic problems in its energy development.

    These challenges include: Striking an energy supply-demand balance; overcoming the environmental and biological problems caused by China's long-standing dependence on coal; easing logistics problems brought about by the transport of coal from its coal-rich western and northern regions to coal-scarce eastern and southern ones and the transfer of electricity from west to east; and how to reduce dependence on foreign energy supplies to ensure the country's energy security.

    The large-scale development of nuclear energy will play a key role in freeing up China's domestic resources, guarantee its energy security, help reduce its greenhouse gas emissions and ensure that a green, low-carbon development model is adopted.

    Nuclear power is so important to China in promoting a clean, sustainable energy system because it is not only free of sulfur dioxide emissions and carbon dioxide pollutants but is also high-power density energy with a high load factor.

    Nuclear power also stands out as an energy source because of its ever-improving safety and reliability, clear cost advantages over coal power and issues of transport.

    For example, nuclear power produces about 1 percent of the greenhouse gas emissions produced by same-capacity coal power. And because nuclear power fuel needs much less transport than does coal, this can ease pressures on transport infrastructure.

    China's nuclear power stations are highly reliable, all of their equipment, buildings and installations and preliminary testing having been built and checked under the strictest quality control conditions. All of China's nuclear power stations are distributed across its coastal area, with their generating units operating in a safe way. No nuclear accident has ever occurred in China, under classification standards of the International Atomic Energy Agency.

    China now leads the world in building third-generation nuclear power stations. Apart from third-generation pressurized water reactor stations of the AP1000 and EPR types that are being built, it is also working on AP1000 technology and promoting research and development of CAP1400 technology.

    The author is an academician with the department of energy and mining engineering, Chinese Academy of Engineering.
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    K+S chairman backs CEO after report of pressure to replace him

    Germany's K+S is happy with Norbert Steiner as chiefexecutive, the potash and salt mining group's chairman said in response to a report that there was board pressure to replace him with the K+S finance chief.

    German magazine Bilanz reported on Wednesday that "influential supervisory board members" at K+S were pressing for Chief Financial Officer Burkhard Lohr to be made CEO before its May 11 AGM because they were dissatisfied with the business.

    "The board is very satisfied with the work of Mr Steiner," supervisory board Chairman Ralf Bethke said in a statement in response to the report, which cited unnamed company sources.

    Bethke said the board had been looking intensively at the succession plan for Steiner, whose contract runs out after the 2017 annual shareholder meeting, and that it would publish its decision in due course.

    K+S warned earlier this month of a significant drop in operating profit, citing lower potash prices and output restrictions imposed by environmental regulators.

    Lohr joined as CFO in 2012, having held the same position at construction group Hochtief.

    Steiner, who recently said he expected to retire in May 2017 when his contract runs out, has had a tumultuous time of late.

    Last year, K+S fended off a 41-euro-per share takeover approach from larger Canadian rival Potash Corp, which withdrew its proposal in October.

    Steiner argued at the time the proposed bid failed to take into account the value of K+S's new mining project in Canada and its global salt business but K+S has seen its share price drop to 21 euros, hurt by lower global potash prices.

    The company is facing production outages this year because a environmental regulator in the state of Hesse in December gave only provisional approval for the disposal of waste water and imposed strict limits.

    K+S has said it expects to get the regulator's final approval, meaning that restrictions would be lifted, by summer of this year.

    Separately, German prosecutors are pressing charges against CEO Steiner and 13 other K+S employees over alleged illegal waste water disposal, but the court has yet to decide whether the case will go to trial.

    K+S has said a legal audit it had commissioned by an external law firm found no evidence of criminal conduct.
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    Facing losses and grain glut, U.S. farmers to plant more corn

    Three years into a grain market slump, U.S. farmers are set to plant more corn, taking a calculated gamble that higher sales will help them make up for falling prices without triggering even more declines.

    Forecasts suggest that at current prices growers will be able to cover their variable expenses such as seed and fertilizer. By planting more and scrimping on everything from labor to crop chemicals, farmers hope to cover a portion of hefty fixed costs, including land rents.

    Their strategy marks a reversal from the last time that prices for corn, soybeans and wheat fell for three years running in mid-1980s. At that time, farmers cut production and prices began rising.

    Illinois farmer Dave Kestel said he would be lucky to break even on the corn he planned to start planting in April on his farm in Manhattan, an hour's drive southwest from Chicago. He aims to plant roughly the same area as last year, about 500 acres (202.34 hectares), despite lower prices.

    "It's a vicious circle, but you still do it," Kestel said, about planting corn.

    Barring a weather disaster, more corn planted means a bigger harvest that will add to massive global crop inventories that have kept prices below break-even levels. The swollen stockpiles also make any price recovery unlikely even if U.S. output were to decline.

    With no rebound in sight, cranking up production might be the best shot U.S. farmers have at balancing their books in a falling market, economists say.

    Still, many will fall short of covering the outlays they cannot change, and paying for land and the cost of depreciating machinery will drag operations into the red, they warn.

    Variable expenses often make up roughly half of a corn farmer's costs, economists say, although those vary from farm to farm and state to state.

    "There still is a fixed cost out there no matter what you do, so the incentive is to go out there and get the variable cost covered and eat into the fixed cost," said Gary Schnitkey, a University of Illinois economist.

    In major grain-producing states of the Midwest, losses from growing corn this year could top $100 per acre, according to forecasts from economists and academics.

    In central Illinois, for example, planting corn will bring in gross revenues of $777 per acre, according to University of Illinois estimates. After variable and fixed costs of $858 per acre, farmers are expected to lose $81 an acre.

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    Precious Metals

    Indonesian Investors Said to Prepare $2 Billion Newmont Mine Bid

    An Indonesian consortium led by veteran investment banker Agus Projosasmito is preparing to offer about $2 billion for control of Newmont Mining Corp.’s operations in the country after lining up bank financing, people with knowledge of the matter said.

    The investor group plans to bid for about 80 percent of local operating company PT Newmont Nusa Tenggara over the next week at the earliest, the people said, asking not to be named before an announcement. It is poised to borrow about $1 billion from banks including BNP Paribas SA, Malayan Banking Bhd. and Societe Generale SA, as well as state-owned lenders PT Bank Negara Indonesia and PT Bank Mandiri, according to the people.

    PT Medco Energi Internasional, the Jakarta-listed oil and gas producer founded by businessman Arifin Panigoro, would be a shareholder of Newmont Nusa Tenggara together with Projosasmito after the planned purchase, the people said. As part of the deal, the investor group will offer to buy the 24 percent stake in the Newmont operations held by the Bakrie family’s PT Bumi Resources Minerals, according to the people.

    Newmont is seeking to sell its local business after Indonesia banned raw ore shipments in January 2014 and put a progressive tax on concentrates, a semi-processed ore that’s shipped to smelters for processing into finished metal. The move is part of a wider policy to boost revenue by turning the country into a manufacturer of higher-value products and encourage construction of domestic smelters and refineries.

    ‘Green Rock’

    Newmont Nusa Tenggara owns Batu Hijau, the second-biggest copper and gold mine in Indonesia, after Freeport-McMoRan Inc.’s Grasberg asset, which has the world’s biggest gold reserves. The open-pit Newmont mine, whose name means “green rock” in Bahasa Indonesia, was discovered in 1990 in the southwest region of Sumbawa island.

    Other banks may join the financing later, according to the people. Details of the transaction haven’t been finalized, and there’s no certainty a firm offer will result, the people said. Newmont Mining owned 31.5 percent of its Indonesian operations at the end of September last year, with other stakes held by Japanese trading house Sumitomo Corp. and local investors, according to a quarterly report.

    “Medco is in talks with various parties, and we are in the process of acquiring some major asset in Indonesia,” President Commissioner Muhammad Lutfi said by phone Friday, declining to comment on the identity of the target. A spokesman for Newmont said by e-mail that the U.S. miner and Sumitomo are in discussions with certain interested parties, “but to date, none has secured fully committed financing or final deal terms.”

    A receptionist at Projosasmito’s company said he wasn’t in the office. An investor-relations official at Bumi Resources Minerals and a representative for Maybank didn’t immediately respond to e-mails seeking comment. BNI Corporate Secretary Suhardi Petrus said he couldn’t immediately comment. Spokesmen for Societe Generale and Sumitomo Corp. declined to comment, while a representative for BNP Paribas said she couldn’t provide immediate comment.

    “Medco is indeed our customer, but we can’t comment on its plan for the Newmont acquisition because it is their corporate action,” Bank Mandiri Corporate Secretary Rohan Hafas said by phone Friday.

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    Silver Wheaton Announces Increase to Previously Announced Bought Deal Financing to US$550 Million

    Silver Wheaton Corp. is pleased to announce that, due to strong demand, the Company has increased the size of its previously announced public offering to 33,135,000 common shares, at a price of US$16.60 per common share, for aggregate gross proceeds to Silver Wheaton of approximately US$550 million (the "Offering"). The Offering is with a syndicate of underwriters led by RBC Capital Markets, BMO Capital Markets, CIBC Capital Markets and Scotiabank (the "Underwriters"). In addition, Silver Wheaton has agreed to grant to the Underwriters an option to purchase up to an additional 4,970,250 common shares at a price of US$16.60 per share, on the same terms and conditions as the Offering, exercisable at any time, in whole or in part, until the date that is 30 days following the closing of the Offering. In the event that the option is exercised in its entirety, the aggregate gross proceeds of the Offering to Silver Wheaton will be approximately US$632.5 million.

    The net proceeds of the Offering will be used to repay a portion of the debt that was drawn on the Company's US$2 billion revolving credit facility (the "Revolving Facility") in November 2015 for the US$900 million purchase of the silver stream on the Antamina mine in Peru. As at December 31, 2015, the Company had approximately US$103 million of cash on hand and US$1,466 million outstanding under the Revolving Facility.
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    Russian gold producer Polymetal returns to profit in 2015

    Polymetal returned to profit in 2015 helped by a weaker rouble and the absence of certain write-offs which had pushed the gold and silver producer to a net loss in 2014.

    Polymetal, which competes with other Russian precious metals producers such as Polyus Gold, has benefited from the weakening in the rouble, which reduced its total costs in 2015 by 15 percent to $538 per gold equivalent ounce, which is a mix of gold and other metals.

    The rouble depreciation against the U.S. dollar "more than offset the combined negative impact of domestic inflation and change in the gold/silver price ratio," Polymetal said in a statement on Tuesday.

    The company made a net profit for 2015 of $221 million following a net loss of $210 million in 2014. Its 2015 revenue fell 15 percent to $1.4 billion as average gold and silver prices declined 8 percent and 17 percent, respectively.

    Adjusted earnings before interest, taxation, depreciation and amortisation fell 4 percent to $658 million.

    Its underlying net earnings, adjusted for after-tax impairment charges and reversals and foreign exchange loss, were at $296 million compared with $282 million in 2014.

    The company said its board of directors recommended a final dividend payment of $0.13 per share ($55 million in total). This will bring the total dividend for 2015 to $0.51 per share, or $216 million in total, up 25 percent from a year ago, Polymetal, part-owned by businessman Alexander Nesis, said.

    Polymetal also forecast total costs for 2016 of between $525-$575 per gold equivalent ounce. The company said it was on track to produce 1.23 million ounces of gold equivalent this year, compared with 1.27 million ounces in 2015.

    At the current exchange rates, its capital expenditure for 2016 is expected to be $340 million, up from $205 million last year.
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    Zijin Mining's 2015 profit falls 29 pct on weak gold, base metal prices

    Zijin Mining Group Co Ltd , China's biggest listed gold producer, reported on Friday a 29.4 percent fall in its 2015 net profit as a weak global economy pressured metal prices.

    Zijin Mining posted a net profit of 1.7 billion yuan ($261 million), down from the previous year's 2.3 billion yuan.

    The mining group, which also produces other metals such as copper, lead and zinc, aims to increase its production this year as it expects demand and prices to improve for its products, it said in a statement on the Shanghai stock exchange.

    It expects gold production at its mines to increase by 15 percent to 42.5 tonnes this year and aims to raise its mine-produced copper by three percent to 155,000 tonnes, it said.

    "As gold and other metals are seen as safe haven metals, we expect prices to be well supported with some room for rises this year. Base metal prices are also expected to rebound gradually," the mining group said in the statement.

    Zijin is one of many Chinese companies that have made inroads into overseas markets as part of efforts to step up presence globally.

    The mining group now owns stakes in foreign assets such as Barrick Gold Corp's Porgera mine in Papua New Guinea and Ivanhoe's Kamoa copper project in the Democratic Republic of Congo.

    The results statement came after China's markets closed on Friday. The company's Shanghai shares rose 0.3 percent, lagging China's main stock indices.
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    Base Metals

    Workers at Cerro Verde copper mine in Peru plan strike next week

    Workers at Freeport McMoRan Inc's Cerro Verde mine in Peru plan to go on a 48-hour strike April 8 to protest what they describe as the near disappearance of their profit-sharing bonus this year, the union said Thursday.

    Freeport has a 53.56 percent stake in the mine, one of Peru's biggest with 32,000 tonnes of reported copper output in January. Sumitomo Metal Mining Company Ltd controls 21 percent and Peruvian miner Buenaventura owns 19.58 percent.

    Each worker is scheduled to receive an average bonus of 483 soles ($146) this year based on 2015 profits, down from about 30,000 soles ($9,090) the year prior, said union leader Zenon Mujica.

    Copper lost a quarter of its value in 2015, the red metal's biggest slump since 2008.

    Representatives of Cerro Verde could not immediately be reached for comment outside regular working hours.

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    Glencore to invest $1.1bn in Zambia, kwacha gains

    Glencore plans to invest over $1.1 billion in Zambia to sink three shafts with new technology that will extend mine life by over 25 years, pushing the kwacha to its highest in two months.

    “The news from Glencore obviously sent a positive signal but overall we are seeing a lot of dollar supply with very little demand,” analyst Maambo Hamaundu said.

    Glencore plans to make investments  now and 2018 and it was expected that Mopani Copper Mines (MCM) would be turned into a world-class mining operation by 2023, it said.

    “We firmly believe that we shall be able to overcome the challenges that we face today as a company and become profitable and operationally-efficient,” Mopani  said in a statement.

    Glencore was fully committed to Mopani and had invested over $3 billion in upgrading infrastructure and in major capital expansion programmes since 2000, Mopani said.

    An electricity shortage in Africa’s second-biggest copper producer and weaker prices have put pressure on Zmbia’s mining industry, threatening output, jobs and economic growth.
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    China discovers first 10-million-ton porphyry copper deposit

    According to the exploration and evaluation of China's first ten million tons of porphyry copper deposit which was finished recently, the long-term copper resources in the Southern Tiegelong deposit are predicted to surpass 15 million tons.

    From 2013 to 2015, a total of 10.98 million tons of copper were discovered at the Southern Tiegelong deposit in Gaize county, Tibet, which makes it China's largest single million-ton copper deposit.

    The long-term copper deposit is estimated to exceed 15 million tons, marking a breakthrough in mine exploration in the region.
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    Copper miner Codelco posts historic loss in 2015

    Codelco, the world's biggest copper producer, reported a 3.6% rise in output in 2015 but a fall in the price of the metal led it to post a historic earnings loss. 

    The Chilean state-run company said in results published Thursday that it produced 1.73-million tonnes of copper last year from its wholly owned mines. Declining ore grades at its older sites were counterbalanced by a boost from the new Ministro Hales mine. 

    Mining companies globally have been reducing output and jobs as a way of coping with a six-year low in the copper price, and Codelco has been cutting costs. Despite the cost cuts, last year it said it had a pre-tax loss of $2.19-billion, significantly down from a $3.03-billion profit in 2014, and its worst bottom-line result since it began issuing earnings reports in the early 1990s. 

    Codelco was nationalised in the 1970s and returns all its profits to the state, providing an important source of income to the government. The fall in the copper price, sparked by cooling demand in key buyer China, has forced the centre-left government of President Michelle Bachelet to curb budget spending and reduce economic growth forecasts. 

    Codelco said its production cost per pound was $1.39 in 2015, down 8% from the previous year.
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    Alcoa shuts Warrick aluminium smelter in Indiana, rolling mill still operates

    Alcoa has permanently closed a 269,000 mt/year primary aluminium smelter at its Warrick Operations in southwestern Indiana but continues to operate a rolling mill and coal-fired power plant at the site, which is located about 10 miles east of Evansville, a company spokesman said Monday.

    Alcoa earlier this year said it planned to shut the 56-year-old smelter by the end of the first quarter as it was no longer financially viable.

    By the end of Q2, Alcoa also expects to reduce alumina output by 1 million mt including curtailing the remaining 810,000 mt of refining capacity at its Point Comfort operations in Texas.

    About 325 employees, many of them members of the United Steelworkers union, were laid off at Warrick, although some 1,100 employees remain, Alcoa spokesman Jim Beck said in an interview.
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    Non-Chinese aluminium output creeps up to four-year high

    China still holds the key to balancing the global primary aluminium market.

    Its exports of metal in the form of semi-manufactured products have slowed in the first couple of months of 2016 but at 590,000 tonnes they represent the movement of significant surplus into the rest of the world.

    The exact state of Chinese production is uncertain, with February figures from the China Nonferrous Metals Industry Association (CNIA) pending.

    Run-rates appeared to drop significantly over December and January but the market has been caught out before by volatility in the data over the end-year period, both calendar and Lunar.

    Only with the February figures will we see whether all the talk of curtailing production in return for government assistance in stockpiling metal has translated into a material drop in output.

    However, with all eyes on what is happening in China, it's easy to overlook a trend of rising production in the rest of the world.

    Without anyone really noticing, run-rates crept up to an annualised 25.51 million tonnes in February, the highest level since December 2011, according to the International Aluminium Institute (IAI).

    Output in the first two months of 2016 rose by 3.7 percent, an acceleration from growth of 2.5 percent over the course of 2015.

    It's a surprising outcome for a market still trading just above November's six-year low of $1,432.50 per tonne and burdened by high stocks.

    But while production is declining in the United States and Brazil, new capacity is simultaneously firing up elsewhere.


    The last spurt in aluminium production growth outside China took place in the Gulf region in 2014, resulting from the full ramp-up of the 1.3-million-tonnes per year EMAL smelter in Abu Dhabi.

    Production growth in the Gulf braked sharply last year to 2.3 percent from 27.4 percent in 2014 and is running at just 1.5 percent so far this year.

    That is probably reflective of "normal" capacity creep at smelters such as Aluminium Bahrain, which lifted output by 30,000 tonnes last year to a record 960,600 tonnes.

    As Gulf production growth levels off, a new driver is taking over in the IAI's Asia (non-China) reporting region.

    Output here jumped by 23.6 percent last year and growth is still running at a fast 18.3 percent so far this year.

    This is largely down to the commissioning of new smelters in India; Mahan and Aditya, both operated by Hindalco, and the giant Jharsuguda II, operated by Vedanta Resources .

    Hindalco, part of the Aditya Birla group, reported primary metal production of 296,000 tonnes in the fourth quarter of 2015, up 35 percent on the year-earlier period.

    The 360,000-tonnes per year Mahan smelter in the state of Madhya Pradesh was operating at full capacity by the end of December, while the similar-sized Aditya plant in the state of Orissa is "well on course for full ramp-up", according to Hindalco.

    Both have captive coal-based power supply and are fed by the new Uktal alumina refinery, which itself is working towards capacity of 1.5 million tonnes per year.

    Vedanta's 1.25-million-tonnes per year Jharsuguda II plant began commissioning at the start of 2015 and is only slowly firing up towards nameplate capacity.

    The plant produced 19,000 tonnes of metal in the fourth quarter of 2015 and as of Dec. 1 a total 80 pots had been energised.

    Quite evidently, full ramp-up is going to be a lengthy affair and the smelter will continue adding to India's and the region's aluminium production profile over the coming period.

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    Copper stocks move to China

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    Insurance risk on tailings dams? How can risk assessment reduce the probability of tailings failure?

    Harvey McLeod: Well as I mentioned before, if you don't know you have a problem you are not going to manage it. The process of risk assessment is really getting everybody to think about what could go wrong, because if you have some ideas of what could go wrong, then you can start implementing both management practices to manage the risk but also engineer or design other procedures which will reduce the likelihood or the consequence of something happening. It's important to illustrate that risk is a combination of two things: it's the likelihood that something will happen and the consequence. What role does risk assessment play in mine financing?

    Harvey McLeod: Well I will think you will see with these recent failures that there’s been a large drop in the equity of the companies. Moving forward you will see financiers and shareholders saying: "Wait a minute, if I am going to invest my money in this company, what are the risks?" Insurers will be asking the same questions. Traditionally insurance companies haven't focused on tailings dam failure. It's been more of a global insurance policy. And certainly after the Omai and Los Frailes in the late '90s insurers started asking, "Should we have different systems for insuring mining companies?"

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    Steel, Iron Ore and Coal

    Tata Steel in talks to take stake in Thyssenkrupp's Europe steel unit-paper

    India's Tata Steel is planning to take a stake in Thyssenkrupp's European steel unit, German business paper Rheinische Post reported, citing government sources in Berlin.

    Talks are at an advanced stage, the paper said, adding several scenarios were being discussed, the most likely being a joint venture with Tata Steel holding an option to increase the stake at later stage.

    The paper said a spokesman for Thyssenkrupp declined to comment on the report, but he added a consolidation in the steel sector made sense.
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    Iron ore volumes in Dalian jump to record amid market swings

    Iron ore trading on China’s Dalian Commodity Exchange surged to a record last month as prices rallied and some investors who’d bet against the market were caught out, boosting futures volumes of the raw material in the world’s largest buyer.

    Volumes soared to 76.2 million contracts, or 7.6 billion metric tons, surpassing the previous high of 32.6 million contracts that was set in December, according to bourse data. Compared with March 2015, the volumes last month increased 661%. The contracts began to trade in 2013.

    Some industry leaders including Australia’s Fortescue Metals Group and Cliffs Natural Resources, the top US producer, have said that derivatives markets in Asia are playing an increasingly important role in shaping swings in benchmark prices. Last month, spot prices posted their biggest one-day rally after Chinese leaders talked up their commitment to sustaining growth before retracing gains. Iron ore has risen this year, contrary to expectations from some banks for further losses amid a global glut.

    The surge in prices and trading volumes in Dalian was sparked by short-covering and eventually a so-called short squeeze, according to Xiao Fu, a commodities strategist at Bank of China International in London, describing a situation in which investors who’d bet against a price are suddenly forced to reverse wagers as prices jump. The rapid, upward movement in prices had also attracted speculative trading, Fu said in an e-mail.

    Ore with 62% content in Qingdao ended March 8.3% higher at $53.75 a dry ton to cap the biggest quarterly gain since 2012, according to Metal Bulletin. On March 7, the raw material surged 19%, then fell 8.8% two days later. In Dalian, futures swung between a low of 377.5 yuan a ton on March 1 and a high of 449.5 yuan mid-month as sentiment ebbed and flowed. It was at 385.5 yuan on Friday after rising 1.5%.

    “You get universal pessimism and then you get a switch to kind-of universal optimism, that’s why you get such violent moves,” Ian Roper, a Singapore-based director at Macquarie Group’s commodities research division, said by phone. “The whole commodities space is going to be much more driven by these mini-cycles.”

    Dalian’s futures for iron ore, which are restricted to citizens and companies registered on the mainland, are among derivatives tracking the commodity, with Singapore Exchange, CME Group and Intercontinental Exchange also offering products. Three calls to the Dalian bourse’s spokesman Wang Weijun for a comment were unanswered.

    As iron ore is heavily traded in the futures markets, it will be driven by any positive or negative news flow, Fortescue chief executive officer Nev Power told Bloomberg Television last month. The benchmark price is being controlled by the futures market and by speculation on the Dalian exchange, according to Lourenco Goncalves, chief executive officer of Cleveland-based Cliffs Natural.
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    Hebei large coal firms to cut 63 mln T capacity

    Hebei-based Kailuan Group, Jizhong Energy, and Hebei State-owned Assets Holding & Operation CO., Ltd. would shut a total 52 mines involving 52.98 Mtpa capacity in the next 3-5 years, one official with Hebei State-owned Assets Supervision and Administration Commission (SASAC) said.

    Meanwhile, these companies will consolidate 62 mines, which will cut 10.09 Mtpa capacity.

    Industry insiders said Jizhong Energy will be the last survivor in the supply-side reform, as the price of its major product coking coal will be easier to rebound after the market restoring balance between demand and supply.

    Since last year, Jizhong Energy has closed many mines under its Jingxing mining district, Hankuang Group and Zhangkuang Group.

    The group also eliminated inefficient capacity and expanded core business, suspending three mining areas and closing operation areas with inferior coal quality, high operation cost and low safety work conditions.

    "Jizhong Energy hasn’t released detailed de-capacity measures yet," one insider with the group said. "But it surely will take great responsibility in the province."

    Hebei’s premium-grade mines are reducing, said the provincial Coal Industry Association, adding that the province is facing great challenge in upgrading and reformation.
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    Mechel to supply Baosteel Resources with nearly 1 mln T coking coal

    Mechel PAO, a leading Russian mining and metals company, announced that its cooperation agreement with China's major corporation Baosteel Resources has been prolonged, GlobeNewswire reported on March 31.

    Since April 2016 and until March 2017, Mechel will supply the Chinese company with up to 960,000 tonnes of premium-grade coking coalproduced at Neryungrinsky Open Pit.

    Most of this coal will be shipped via Mechel's own Trade Port Posiet. The price will be determined on a monthly basis.

    "We have established constructive ties with Baosteel Resources. In the future, Mechel intends to adhere to the best of practices in dealing with this company. We supply our partners with high-quality coking coal which has long become a trademark of Yakutia and all of Russia's Far East," Mechel's Chief Executive Officer Oleg Korzhov commented.

    "Baosteel Resources accounts on average for 30% of our coal exports to China, that has always been a priority market for us," Oleg Korzhov noted.
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    Iron ore revival throws shaky lifeline to small miners

    A surprise spike in iron ore prices this year is shaking out fresh supplies of the steelmaking raw material, but some miners say it is too soon to aggressively restart production shuttered by a years-long price rout.

    Iran said it has increased shipments to top iron ore consumer China, while traders have also seen more cargoes from India and Malaysia as material kept idled in warehouses and ports is pushed out to buyers to take advantage of the price spurt.

    The steelmaking raw material is still the top performing commodity this year despite falling 16 percent from last month's peak, but the wild swings have kept miners wary about the longevity of the price recovery.

    "The trade signals are not strong enough yet for a sustainable lift in demand," said UBS commodities analyst Daniel Morgan.

    Still, in Iran, vessels loaded with iron ore bound for China have increased "remarkably", Keyvan Jafari Tehrani, head of international affairs at the Iron Ore Producers and Exporters Association of Iran, told Reuters.

    "When the price of iron ore rose above $50 a tonne, the number of shipments to China increased and if it stays above $55, more mines will resume production," said Tehrani.

    Iran is the sixth-biggest iron ore exporter to China, but shipments fell 40 percent last year to 13.2 mln tonnes as prices tumbled. Around 70 percent of private iron ore mines in Iran shut in the past two years due to the market rout, Tehrani said.

    "We also heard some Malaysian cargoes being quoted in the market which we haven't seen in a while," said a Shanghai-based iron ore trader.

    "If the price is right there's a market for them," added the trader, who is keen on buying some cargoes from Indian suppliers that have become active in the market in recent weeks as prices climbed.

    India used to be a major iron ore exporter to China until court-imposed mining curbs in a crackdown on illegal extraction halted shipments. Mining in the western Goa state, India's top iron ore exporter, resumed in October after a three-year gap.

    But Goan miners say a 20-million tonne annual production cap will limit any benefit from strong prices. Shipments from Goa reached about 50 million tonnes in 2010/11, during iron ore's boom years when it reached nearly $200 a tonne.

    The price rise is a boost for existing miners such as global giants Rio Tinto and BHP Billiton , where every one dollar a tonne price hike over a year is worth roughly $250 million, according to UBS.

    But small miners say it is too early to restart idled output.

    "It's not easy to turn mines on and off. If you've demobilized staff and equipment, it's no easy feat to suddenly bring it all back, particularly in the absence of real proof these prices are sustainable," said an executive for a smaller-sized Australian iron ore company.

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    Vale says write down of Mozambique coal venture won’t affect project

    Mining giant Vale said Thursday that its venture partner in Mozambique’s coal project, Japan’s Mitsui & Co., has no plans to revise the terms of their association or its involvement in it, as reported by Brazilian newspaper Valor Econômico (in Portuguese).

    Citing unnamed sources, the local paper claimed that Mitsui was mulling a revision of the joint venture after Vale took a $2.4bn charge on their jointly owned Mozambique coal assets.

    The operations continue to cost Vale half a billion dollars per year in losses, according to the financial results released in February. The Mozambique write-down was the second largest single factor behind Vale’s $8.57 billion fourth-quarter net loss. The biggest single write-down was $3.46 billion on a nickel project in Canada.

    The Mozambique coal operations cost Vale half a billion dollars per year in losses.

    Vale has been unable to obtain project financing to complete a 2014 deal to sell a stake in its Mozambique coal operations to Mitsui. That transaction, originally scheduled for completion in the second half of 2015, would have boosted Vale’s cash flows by $3 billion.

    The Rio de Janeiro-based miner noted that Mitsui continues to support Vale in its negotiations with Nexi and JBIC for financing.

    The Moatize basin in Mozambique’s northwest Tete province is said to hold one of the world’s largest untapped coal reserves, being especially rich in coking coal, which is used in steel production.

    But companies operating in the area are battling the sharp drop in coal prices and demand, while the reserves of coking coal have turned out to be not as rich as initially thought. They have also been hurt by infrastructure challenges as they still depend on one colonial-era, multi-use single-track railway line to ferry coal to the Beira port.

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    China mid-March key steel mills daily output hit the highest this year

    The daily crude steel output of China’s key steel mills increased 4.71% from ten days ago to 1.66 million tonnes in mid-March, hitting the highest level in 2016, according to the latest data released by the China Iron and Steel Association (CISA).

    The rising crude steel output, mainly due to the expanded production recovery spurred by the rebound of steel prices, may exert pressure on further price increase, said industry insiders.

    By March 20, stocks in key steel mills edged up 0.36% from ten days ago but down 20.7% on year to 13.76 million tonnes.

    Domestic prices of the six major steel products all increased in mid-March, with rebar price averaging 2245.7 yuan/t, up 4.6% from early March. It was the fourth ten-day rise since mid-February this year, with total increase at 311.6 yuan/t, showed data from the National Bureau of Statistics (NBS).

    Most of steel mills reported increased orders, and became much more bullish towards the market over the first half of the year, though the prospect of the second half still remains unclear.
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    Shaanxi rail freight cut 15pct, effective March 30

    The Xi’an Railway Bureau cut the rail freight by 0.0269 yuan/ or nearly 15% to 0.1451-0.1571 yuan/ for coal deliveries within its administration, Effective March 30, following China Railway Corporation’s delegation of rail freight adjustment to local administrations on March 18.
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    Baosteel expects higher 2016 steel output even as China combats glut

    China's top listed steelmaker Baoshan Iron and Steel Co. Ltd (Baosteel) expects its total output to rise about 20 percent in 2016, even as the country steps up efforts to slash a massive capacity glut amid a rise in anti-dumping complaints.

    China has been aggressively shipping out its surplus steel products and selling them, according to other producing nations, at unfairly low prices. Exports hit a record 112 million tonnes last year and as recently as this week, India's Tata Steel put its British operations up for sale, blaming a glut in cheap Chinese steel for the move.

    Total steel capacity in China is estimated at around 1.2 billion tonnes and is expected to further increase this year, according to the China Iron and Steel Association.

    Baosteel's huge Zhanjiang steel production base, with an annual capacity of about 9 million tonnes, goes into operation later this year, its board secretary Zhu Kebing said.

    Baosteel, the listed arm of China's No.2 steel producer - the Shanghai-based Baosteel Group, produced 22.6 million tonnes of crude steel in 2015, and is likely to produce 27.1 million tonnes this year, Zhu added on Thursday.

    "As a result of the completion of main production lines at the Zhanjiang project in 2016, the scale of the company's output will show an increase," he said. Zhu, however, added that steel prices, currently near decade-lows, are expected to remain weak.

    The plunge in the prices of steel amid a slowdown in China's economic growth has taken a toll on producers' earnings, with Baosteel reporting a 82.5 percent year-on-year slump in 2015 net profits to 1.013 billion yuan ($156.70 million).

    Other steel firms fared even worse last year. Maanshan Iron & Steel reported losses of 4.8 billion yuan after a modest profit in 2014, Hunan Valin Steel also posted a loss of 2.96 billion yuan, while the Angang Steel Company reported losses of 4.59 billion yuan.

    With China's steel capacity surplus at around 400 million tonnes and average utilisation rates at under 70 percent, the government is aiming to shut around 100-150 million tonnes of capacity in the next five years.


    Local governments are currently working out how the capacity closure targets will be divided among producers, Zhu said.

    "Looking over the long-term, China's steel demand has already hit a peak and some capacity needs to be withdrawn from the market, or merged and restructured, and this will benefit the company by raising our market value," he added.

    Increased buying from Chinese steel mills has buoyed iron ore prices this year, but Zhu does not see this rally lasting.

    Spot iron ore prices .IO62-CNI=SI have risen 24 percent so far in 2016, but have fallen 16 percent from this year's high of $63.30 a tonne reached on March 8.

    "The price increase in March was the result of many different factors, and short-term fluctuations are normal, but (we) don't think it is sustainable," he said, adding that iron ore will remain oversupplied this year.

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    Shenhua may not go ahead with Watermark project, report

    China Shenhua Energy, the country’s top coal producer, may not go ahead with its Watermark coal mine project on the NSW Liverpool Plains, as low prices and weak demand make it unviable, the Sydney Morning Herald reported/
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    German EconMin wants to help steel sector compete with China

    German Economy Minister Sigmar Gabriel backs demands from Europe's steel industry to create globally fair competition and has, with some EU counterparts, asked the EU to take measures to help, a spokeswoman said on Wednesday.

    "Overcapacity in China's steel sector should not be a burden on EU manufacturers," said an Economy Ministry spokeswoman, adding the industry's situation was serious in view of high levels of Chinese exports.

    "Minister Gabriel, with seven other European ministers, therefore wrote to the EU Commission and Council Presidency at the start of February and demanded trade policy measures to fight competition distortion in the steel sector," she said.
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    CEO up for prison

    U.S. prosecutors are urging a judge to give convicted ex-Massey Energy CEO Don Blankenship the maximum penalty of a year in prison and a $250,000 fine, for its participation in a 2010 West Virginia coal mine explosion that killed 29 men.

    In an 11-page court filing Monday evening, Assistant U.S. Attorney Steve Ruby said that “only a sentence of many years in prison could truly reflect the seriousness” of Blankenship’s crime and provide “just punishment.”

    The former mine executive was convicted of conspiracy in December, originally facing a sentence of up to 30 years in jail.

    He also noted that federal laws state that willfully violating mine safety and health standards “is worth, at most, a year in prison.”

    The former mine executive was convicted of conspiracy in December, originally facing a sentence of up to 30 years in jail. However the penalty was reduced after he was found not guilty on counts of securities fraud and making false statements.

    But Blankenship's attorneys say he shouldn't receive more than probation and a fine. The former CEO denied any wrongdoing, and his legal team has restated their intention to appeal as they believe prosecutors unfairly sought to portray their client as some kind of a monster who cold-heartedly sent miners to their deaths by denying requests to equip the mines with necessary safety gear., and then lied to authorities about it.

    Sentencing for the man once known as West Virginia's “King of Coal,” is slated for April 6, which marks the sixth anniversary of the Upper Big Branch mine disaster. Prosecutors are also trying to force Blankenship to pay $28 million in restitution to Alpha Natural Resources, a now-bankrupt coal company that bought Massey in 2011. The money would cover legal fees, investigative expenses and fines incurred by Alpha.

    The closely watched case has been one of the most high-profile cases in West Virginia in decades, and the explosion at Massey’s Upper Big Branch mine is considered the worst U.S. coal mining disaster in almost 40 years.

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    Glencore, Tohoku yet to finalize talks on FY 2016 contracts

    Australian coal producer Glencore and Japanese utility Tohoku Electric Power Co. are yet to finalize talks for Japanese fiscal year contracts starting April 1, sources said.
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    Datong Coal halts mines after accident, boosting market sentiment

    Datong Coal Mine Group, one major coal producer in northern China’s Shanxi province, halted production at all of its consolidated coal mines in the wake of a mine accident at its subsidiary Anping Coal Industry Co., Ltd last week.
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    Tata Steel puts British business up for sale

    India's Tata Steel, Britain's largest steelmaker, put its entire UK business up for sale to stem heavy losses, a move that would draw a line under its almost decade-long foray into Britain's declining steel industry.

    After a marathon board meeting in Mumbai, the steel giant said the financial performance of its UK arm had deteriorated sharply in recent months, following years of weak conditions which have already forced it to shed hundreds of jobs.

    Blaming high manufacturing costs, domestic market weakness and increased imports into Europe from countries like China, Tata saw little change in the competitive position of its UK operations, which employ about 15,000 people and include Port Talbot, Britain's largest steel plant.

    As a result, Tata said in a statement its European arm would "explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts".

    "Given the severity of the funding requirement in the foreseeable future, the Tata Steel Europe Board will be advised to evaluate and implement the most feasible option in a time-bound manner," it added.

    Tata Steel bought Anglo-Dutch steelmaker Corus in 2007 and has since struggled to turn the giant around.

    The company said it remained in talks with the UK government, which has expressed concern about job losses in the industry. Port Talbot, though far from its 1960s peak, still employs about 4,000 people, and Tata is one of the most significant private companies in Wales.

    Unions welcomed the decision not to shutter the plants but called on Tata to be a "responsible seller" and on the government to play its role.

    "We don't want just want more warm words, we want a detailed plan of action to find buyers and build confidence in potential investors in UK steel," Roy Rickhuss, general secretary of steelworkers' trade union Community, said.

    For the year ending March 2015, the company took a write-down of a little over a billion dollars in its consolidated numbers. However, the tide seems to be turning for the India operations, and many analysts expect it to post an improved operating profit from the next fiscal year.

    Tata also said in its statement that it was still in talks with investment firm Greybull Capital over the sale of its British long products unit, which makes steel for use in construction. Talks with Greybull were announced last year.
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    Hubei to cut coal capacity of 8 mln T in 3-5 years

    Central China’s hubei province pledged to cut coal production capacity of 8 million tonnes per year in the next three to five years, with 80-100 coal mines expected to be closed, local media reported.

    All the small coal mines with annual capacity below 90,000 tonnes across the province would be shut by 2020, accounting for 72.8% of the coal mines presently operating in the province, it said.

    The province now has 320 coal mines, compared to as many as 2,800 mines in 2000, thanks to successive mines merger & regrouping and elimination in the past years. All of them were small coal mines with annual capacity below 300,000 tonnes, and their capacity combined at 23.58 million tonnes per year.

    Most of coal mines in Hubei suffered great losses amid the market downturn. In 2015, the province produced 7.5 million tonnes of raw coal, accounting for only 40% of the total capacity.

    China’s central government has allocated 100 billion yuan ($15.4 billion) as special subsidies and incentive funds to deal with the resettlement of laid-offs during the process of capacity elimination.
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    China key steel mills Feb steel products sales up 5 pct

    China’s key steel mills sold 39.67 million tonnes of steel products in February, up 5.14% on year, according to the latest data released by the China Iron and Steel Association (CISA).
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    China's Dongbei Special Steel misses payment on short-term note

    Dongbei Special Steel Group Co Ltd, an unlisted steel manufacturer based in Northeast China, missed a payment on an 800 million yuan ($123 million) short-term note which matured over the weekend, the Shanghai Clearing House said in a statement on its website.

    The firm had previously warned Friday evening that it might be unable to pay on time, citing tough conditions in the steel industry as a whole and strong pressure on its sales.

    Money and bond markets showed little reaction to the news, with the volume weighted average rate of the benchmark seven-day bond repurchase agreement in the interbank market down three basis points in morning trade and the yield on AA rated five year corporate debt up just one basis point.

    "The news should be basically priced in already," said a bond trader at a commercial bank in Shanghai.

    "The overall trend of the bond market is pretty well established, and you may start to see more differentiation based on individual companies, but this particular event isn't likely to have too much impact."

    According to international convention, debtors usually have a 30-day grace period to avoid formal default, but traders said that in China this was not necessarily the case.

    Overcapacity and volatile prices have resulted in a number of Chinese steel firms running into trouble over the past year and a half.

    Earlier in March, financial magazine Caixin reported that Tianjin-based Bohai Steel Group Co Ltd may be unable to make full repayment on 192 billion yuan of debt.
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    China Shenhua Energy's profit falls, to cut output in 2016

    China Shenhua Energy's net profit fell 56.9 percent in 2015, missing forecasts and dropping for a third straight year due to lower demand in a slowing economy and the country's efforts to switch to cleaner forms of energy.

    The listed arm of the Shenhua Group, China's biggest coal producer, said in its annual report demand for coal and other fossil fuels was likely to fall further in 2016, with the pace of restructuring in the energy sector expected to accelerate and the global economic recovery still lacking strength.

    "We predict coal prices will remain at a low level, losses among coal enterprises will worsen, some coal mines will cut or suspend production and output for the whole year will steadily drop," the firm said.

    In 2015, Shenhua Energy's net profit was 16.14 billion yuan ($2.47 billion), down from the previous year's 37.4 billion yuan, it said in a filing to the Shanghai stock exchange.

    That came in lower than analysts' average forecast of 20.1 billion yuan, according to Thomson Reuters data. The coal producer has seen its annual net profit decline since 2013, with the fall widening each year.

    China's coal sector has been hit by a sustained downturn in demand and a price-sapping capacity glut, forcing big state producers to cut output last year.

    Shenhua Energy produced 280.9 million tonnes of coal in 2015, down 8.4 percent on the year, and its target output for this year is expected to fall 0.3 percent to 280 million tonnes, it said in its results filing.

    It also expects its 2016 revenues to drop 18 percent to 145.1 billion yuan.

    Sales volume in 2015 fell 17.9 percent to 370.5 million tonnes, it said. Output from its coal-fired power stations fell 3.6 percent to 210.45 billion kilowatt hours.

    The efforts of big state miners to cut output brought nationwide production down 3.5 percent to 3.68 billion tonnes, but it did little to gee up the market.

    Prices of coal at the port of Qinhuangdao in Hebei province SH-QHA-TRMCOAL have gained 5.4 percent so far this year, but they remain around 20 percent lower than the same period of 2015.

    The government said in February it would aim to close 500 million tonnes of coal mining capacity in the coming three to five years, but the country's total capacity surplus has been estimated at more than 2 billion tonnes.
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    China to halt construction on coal-fired power plants in 15 regions

    China will stop the construction of coal-fired power plants in 15 regions as part of its efforts to tackle a capacity glut in the sector, the country's energy regulator said on Thursday, confirming an earlier media report.

    The Southern Energy Observer, a magazine run by the state-owned China Southern Power Grid Corp, said regulators had halted the construction of coal-fired plants in regions where capacity was already in surplus, including the major coal producing centers of Inner Mongolia, Shanxi and Shaanxi.

    An official at the communications office of the National Energy Administration (NEA) told Reuters that the report was correct, but he did not provide any further details.

    The report, citing documents issued to local governments by the regulator, said China would also stop approving new projects in as many as 13 provinces and regions until 2018.

    The rapid expansion of China's coal-fired power capacity, together with a slowdown in demand growth, has saddled the sector with its lowest utilization rates since 1978, the NEA said earlier this year.

    Environmental group Greenpeace said the rules, if fully implemented, could involve up to 250 power projects with a total of 170 gigawatts (GW) in capacity, according to initial estimates.

    "China is finally beginning to clamp down on its out of control coal power bubble," said Lauri Myllyvirta, Greenpeace's senior campaigner on coal, in an emailed statement.

    "However, these new measures fall far short of even halting the build-up of overcapacity in coal-fired power generation, let alone beginning to reduce it," he said.

    China's total generation capacity reached 1,485.8 GW by the end of February, up 11.8 percent year on year, according to the latest figures. Thermal power, which mostly consists of coal-fired capacity, rose 9.4 percent on the year to 1,003.8 GW.

    China aims to raise the share of non-fossil fuels to 15 percent of total primary energy by 2020, up from 12 percent at the end of last year.

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    US considers sharp royalty rise for coal.

    US to consider sharp hike in royalties on coal

    MATTHEW BROWN | Associated Press

    BILLINGS, Mont. (AP) -- Royalty rates on coal extracted from massive strip mines on public lands could increase 50 percent under a pending overhaul of a U.S. government program that critics say contributes to climate change, documents released Thursday show.

    The royalty hike was contained in an Interior Department notice providing the first outlines of a planned three-year evaluation of the government's sale of coal from public lands, primarily in the West.

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