Mark Latham Commodity Equity Intelligence Service

Friday 1st July 2016
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    China June PMIs fall to 4-month low

    Manufacturing momentum in the world's number two economy skidded to a four-month low in June, according to twin surveys released on Friday.

    The government's manufacturing Purchasing Managers' Index (PMI), a survey that tracks the health of large and state-owned companies, came in at 50.0 last month, versus 50.1 logged in May and April. The report was bang in line with Reuters' estimates and marked the weakest result since February's 49.0 figure.

    From March-May, the survey logged results above the key 50 level, which separates expansion from contraction. In the seven months before March, the survey remained stuck below 50.

    Caixin's China June manufacturing PMI, which tracks smaller-scale private firms compared to the official gauge, also recorded the fastest rate of deterioration in four months. The index reported a 48.6 reading for June, compared with 49.2 in May.

    "Overall, economic conditions in the second quarter were considerably weaker than in the first quarter, which means there has been no easing of the downward pressure on growth. Against the backdrop of a turbulent external environment, and in order to avert a sharp economic decline, the government must strengthen its proactive fiscal policy while continuing to follow prudent monetary policy," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.
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    China to invest over 2.8 trillion yuan on railways over 2016-20

    China to invest over 2.8 trillion yuan on railways over 2016-20

    China plans to invest over 2.8 trillion yuan (S$617 billion) to build more than 23,000 kilometres of railway lines over the next five years, state media reported on June 30, citing industry sources.

    The state-run Economic Information Daily said this was part of China's 13th Five-Year plan, a blueprint for economic and social development between 2016 and 2020, which Chinese leaders agreed on during a meeting on June 29.

    Citing unnamed sources, the newspaper said the focus will be on inter-city projects as well as the central and western regions of the country, and that the central government will increase budgetary funds to support the sector.

    Almost 3.5 trillion yuan has been spent on China's railway sector since 2011, far exceeding the 2.8 trillion yuan target from the country's 12th Five-Year plan, the newspaper said.

    The government has flagged it intends to spend more on infrastructure to avert a hard landing as the economy cools. The railway construction will bring about need for materials like steel products and cement, which is expected to further support metallurgy, machinery and steel sectors.

    The country's total rail network, mostly built by state firms China Railway Group and China Railway Construction is now 112,000 kilometres long. Its high-speed rail network, the world's longest, is 16,000 kilometres long.
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    Explaining The Latest Chaos In UK Politics

    For those who are confused by the ongoing chaos in UK politics, the following primer should help explain everything:

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    Brazil corruption: Can we make a general case on politics and markets?

    Brazil's federal police on Thursday raided the offices of at least 12 builders to seek evidence of a cartel handling railway projects, antitrust watchdog Cade said.

    Cade did not specify where the raids were conducted but said police suspected some of Brazil's largest construction companies, including Odebrecht SA, OAS SA and Andrade Gutierrez SA, were active members of the cartel. All have already been linked to corruption at oil projects.

    The probe, which started in February, is based on testimony from plea and leniency deals with construction firm Camargo Correa SA, one of the targets of an investigation into price-fixing at state-run oil company Petroleo Brasileiro SA, or Petrobras.

    A spokeswoman for Andrade Gutierrez said the company would continue to collaborate with investigations. Representatives of Camargo Correa, Odebrecht and OAS did not immediately respond to requests for comment.

    According to Cade, the railway cartel was active since 2000 and might have involved up to 37 companies. The agency said there were strong signs that the builders colluded to raise the price of key projects such as the North-South railway, a long-delayed project that would ease shipments of corn and soybeans.

    Police said in February that Camargo Correa admitted to bribing the former president of state-run Valec, which was responsible for building the railways. The confession was part of a settlement with prosecutors last year in which it agreed to pay more than 800 million reais ($247.66 million) in fines and indemnities.

    Dozens of executives from Brazil's largest engineering firms have been jailed for colluding to overcharge Petrobras and using the proceeds to bribe the oil company's executives and politicians, many of whom are part of interim President Michel Temer's coalition.

    The North-South railway, a 1,550-kilometer (963-mile) set of tracks stretching from the interior state of Goias to the coastal state of Maranhão, was started in the 1980s and is not yet entirely operational. The Temer administration plans to grant a northern stretch of the railroad, between Barcarena and Itaqui, to a private operator, Transport Minister Mauricio Quintella said on Tuesday.

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    Mongolia's opposition MPP sweeps back to power on country's economic woes

    The main opposition Mongolian People's Party (MPP) swept back to power in landslide parliamentary elections, results from Mongolia's election committee showed on Thursday, after campaigning dominated by concern over slowing economic growth.

    The transformation of the former Soviet bloc state since a peaceful revolution in 1990 has been a big draw for foreign investors eyeing its rich mineral resources, unleashing a boom from 2010 to 2012.

    But an abrupt economic slowdown since 2012 has stirred controversy over the role of global mining firms such as Rio Tinto, which last month finally approved a $5.3-billion extension plan for the Oyu Tolgoi copper mine.

    The MPP's victory will likely be a greeted as a tailwind for the economy and international miners, as the party's success in attracting investors when it last held power, from 2008-2012, led to the country being nicknamed "Mine-golia".

    The MPP, which has governed for most years since the revolution, won an 85 percent majority with 65 seats in the 76-member parliament, taking back power from the Democratic Party, an unnamed official from Mongolia's general election committee told a press briefing.

    The ruling Democratic Party won nine seats in Wednesday's vote, down from 37. Prime Minister Chimed Saikhanbileg, and the parliament's chairman, Zandaakhuu Enkhbold, were among those kicked out of their seats.

    "The Mongolian People's Party's landslide win shows the public assigning clear blame for the country's economic woes to the outgoing Democratic Party government," John Marrett, an analyst at The Economist Intelligence Unit, said in an emailed statement.

    A late change of election rules hindered independents and small parties during the short 18-day campaign period.

    One seat went to the Mongolian People's Revolutionary Party (MPRP), and one to an independent, popular folk singer Samand Javkhlan, who has taken up environmental causes.


    A vast country with just three million people, best known as the birthplace of Mongol emperor Genghis Khan, Mongolia had struggled in recent years to adapt to a downturn in fortunes.

    Demand for coal and copper from giant neighbor China, and weak commodities prices have hit Mongolia hard.

    The IMF forecasts economic growth of 0.4 percent this year, compared with 17.5 percent in 2011, the year before the Democratic Party took power.

    Since 2012, Mongolia has borrowed billions of dollars in sovereign debt. In March, rating agency Moody's gave it a negative outlook, citing the rising debt burden, a projected widening of budgetary imbalances and mining revenue shortfalls.

    The MPP has criticized the Democrats' economic management and the borrowing spree, promising to reassess spending and tighten fiscal management.

    Mongolian bonds jumped on the election results. The $500 million sovereign bonds due 2021 surged 3 points to 105.25/106 cents on the dollar, and the $500 million bonds from Trade Development Bank due 2020 rose 2.25 points to 97.75/98.75.

    More than half of Mongolia's people are under 30 and grew up in the post-Soviet period of rapid change in the land-locked democracy squeezed between autocratic China and Russia.

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    Southern China power load soars as temperature climbs

    China has witnessed a surge in power load at local grids in southern China since entering summer day, as temperature continues to climb, sources reported.
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    Turkey, Israel sign deal to normalize ties after six years

    Turkey and Israel signed a deal on Tuesday to restore ties after a six-year rift, formalizing an agreement which U.N. Secretary-General Ban Ki-moon said sent a "hopeful signal" for regional stability.

    The accord, announced on Monday by the two countries' prime ministers, was a rare rapprochement in the divided Middle East, driven by the prospect of lucrative Mediterranean gas deals as well as mutual fears over growing security risks.

    It was formally signed on Tuesday by Turkey's Foreign Ministry Undersecretary Feridun Sinirlioglu in Ankara and Israel's Foreign Ministry Director General Dore Gold in Jerusalem, officials said.

    Relations between Israel and what was once its principal Muslim ally crumbled after Israeli marines stormed an activist ship in May 2010 to enforce a naval blockade of the Hamas-run Gaza Strip and killed 10 Turks on board.

    Under the deal, the naval blockade of Gaza, which Ankara had wanted lifted, remains in force, although humanitarian aid can continue to be transferred to Gaza via Israeli ports.

    Turkish Prime Minister Binali Yildirim said late on Monday the two countries might appoint ambassadors "in a week or two."

    Israel, which had already offered its apologies for the 2010 raid on the Mavi Marmara activist ship, agreed to pay out $20 million to the bereaved and injured. The deal requires Turkey pass legislation indemnifying Israeli soldiers.

    "This is an important and hopeful signal for the stability of the region," Ban said at a meeting with Israel's president in Jerusalem on Monday.

    Visiting a U.N.-run school and a Qatari-built rehabilitation hospital in the Gaza Strip on Tuesday, he also called for an end to the Israeli blockade.

    "The closure of Gaza suffocates its people, stifles its economy and impedes reconstruction efforts. It is a collective punishment for which there must accountability," Ban said.

    Israel says the Gaza blockade is needed to curb arms smuggling by Hamas, an Islamist group that last fought a war with Israel in 2014.

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    China commodities rally on hopes of measures to counter Brexit

    Commodity futures in China from steel to soymeal rallied on Tuesday, as investors bet on countries bringing in measures to counter the shock to markets and economies from Britain's vote to leave the European Union.

    Chinese steel futures jumped for a second day, while the rally spread to other commodities.

    "I think there is a fresh wave of speculation," said Yang Zhijiang, an analyst at China Merchant Futures.

    China's commodities markets had recently calmed after a roller-coaster ride started in April, when soaring prices and volumes prompted exchanges to curb speculative activity.

    Yang said there were expectations that countries will boost liquidity or take other steps to counter the impact of the British vote.

    South Korea's presidential Blue House said the government plans to propose an extra budget of around 10 trillion won ($8.55 billion).

    Other analysts pointed to better supply and demand, and firmer markets overseas.

    In the steel market, the most-traded rebar on the Shanghai Futures Exchange closed up 2.5 percent at 2,265 yuan ($341) a ton, after touching a seven-week high of 2,288 yuan.

    The most-active iron ore on the Dalian Commodity Exchange climbed 4.4 percent to end at 419 yuan a ton, after also hitting a seven-week peak of 423 yuan.

    Both contracts surged by their 6 percent ceiling on Monday, following news of a planned restructuring by steelmakers Baosteel Group and Wuhan Iron and Steel Group, reflecting China's efforts to consolidate its steel sector.

    Chinese steel inventories dropped 1.4 percent to 8.84 million tonnes on June 24 from the prior week, said Argonaut Securities analyst Helen Lau.

    Inventories have fallen for the past five weeks, said Lau, adding that the utilization rate at China's blast furnaces is also 9 percentage points below the same period last year.

    "Against these low steel inventory and low utilization rates, there is room for steel prices to increase in our view, given that current steel prices are around 30 percent lower than the same period last year," Lau said in a note.

    Among agriculture commodities, Dalian soymeal rose 5.2 percent, while cotton and rapeseed meal - both traded in Zhengzhou - advanced 4.1 percent and 5 percent, respectively.

    Dalian soybeans gained 2.9 percent after rising as much as 3.5 percent intraday to the highest since September. Dalian egg surged 2.6 percent and palm olein climbed 2.7 percent.

    Tha gains in Chinese-traded soybeans eclipsed Chicago soy which hit a one-week high on forecasts of dry U.S. weather and Chinese demand.
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    Volkswagen's U.S. diesel emissions settlement to cost $15 billion: source

    Volkswagen AG's settlement with nearly 500,000 U.S. diesel owners and government regulators over polluting vehicles is valued at more than $15 billion cash, two sources briefed on the matter said on Monday.

    The settlement, to be announced on Tuesday in Washington, includes $10.033 billion to offer buybacks to owners of about 475,000 polluting vehicles and nearly $5 billion in funds to offset excess diesel emissions and boost zero emission vehicles, the sources said.

    A separate settlement with nearly all U.S. state attorneys general over excess diesel emissions will be announced on Tuesday and is expected to be more than $500 million and will push the total to over $15 billion, a separate source briefed on the matter said.

    Spokeswomen for U.S. Environmental Protection Agency and Volkswagen declined to comment.

    Speaking on condition of anonymity, due to court-imposed gag rules, the first sources said that owners of 2.0 liter diesel VW 2009-2015 cars will receive at least $5,100 compensation along with the estimated value of the vehicles as of September 2015, before the scandal erupted. Some owners will get as much as $10,000 in compensation, the first sources said, depending on the value of the car.

    The $10.033 billion is the maximum VW could pay if it had to buyback all vehicles, but the actual amount VW will pay could be significantly less if a large number of owners take buybacks.

    Prior owners will get half of current owners, while people who leased cars will also get compensation, said the first sources.

    Owners would also receive the same compensation if they choose to have the vehicles repaired, assuming U.S. regulators approve a fix at a later date.

    The settlement includes $2.7 billion in funds to offset excess diesel emissions and $2 billion in VW investments in green energy and zero emission vehicle efforts, the first sources said. The diesel offset fund could rise if VW has not fixed or bought back 85 percent of the vehicles by mid-2019, the first sources said.

    The $2 billion in green energy and zero emission efforts will be spent over 10 years, the first sources said, and will include zero emission vehicle infrastructure.

    The settlement, the largest ever automotive buyback offer in U.S. history and most expensive auto industry scandal, stems from the German automaker's admission in September 2015 that it intentionally misled regulators by installing secret software that allowed U.S. vehicles to emit up to 40 times legally allowable pollution.

    The company's top U.S. executive, Michael Horn, was summoned to testify before Congress and in the days after the emissions scandal broke he said the company had been dishonest. "In my German words: We totally screwed up. We must fix those cars," said Horn, who left the company in March.

    VW still must reach agreement with regulators on whether it will offer to buyback 85,000 larger 3.0 liter Porsche, Audi and VW cars and SUVs that emitted up to nine times legally allowable pollution and how much it may face in civil fines for admitting to violating the Clean Air Act.

    Erik Gordon, a University of Michigan business professor, said "VW had little negotiating power, given the evidence. The costs of the remedies should make automakers cautious about misleading people in ways that give prosecutors the ability to bring criminal charges. Potential criminal charges mean you open your wallet in the civil actions, hoping to receive leniency instead of jail time."

    Reuters reported earlier the initial VW settlement would not include civil penalties under the U.S. Clean Air Act or address about 85,000 larger 3.0 liter Audi, Porsche and VW vehicles that emitted less pollution than 2.0 liter vehicles. A deal covering the 3.0 liter vehicles may still be months away.

    The settlement does not address lawsuits from investors or a criminal investigation by the Justice Department.

    Regulators will not immediately approve fixes for the 2.0 liter vehicles – and may not approve fixes for all three generations of the polluting 2009-2015 vehicles, sources previously told Reuters.

    Owners will have until December 2018 to decide whether to sell back vehicles and fixes may not eliminate all excess emissions.

    VW cannot resell or export the vehicles bought back unless EPA approves a fix, Reuters reported last week.

    VW, the world's second largest automaker, has seen U.S. VW brand sales suffer in the wake of the crisis. VW brand sales are down 13 percent in the United States in 2016, while sales of its luxury Audi and Porsche units have risen.

    U.S. District Judge Charles Breyer in San Francisco will hold a hearing on July 26 to decide on whether to grant preliminary approval to the settlements. If granted he would hold a later hearing to give final approval. Buybacks are likely to start no earlier than October, the first sources said.

    In April, VW set aside $18.2 billion to account for the emissions scandal.

    VW had said the scandal impacted 11 million vehicles worldwide and led to the departure of CEO Martin Winterkorn.

    Last week, Germany's financial watchdog called on prosecutors to investigate VW's entire former management board over the time it took to disclose the carmaker's emissions test cheating, a person familiar with the matter told Reuters.

    German prosecutors said this month they are investigating Winterkorn and a second unidentified executive over whether they effectively manipulated markets by delaying the release of information about the firm's emissions test cheating.
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    SEC adopts rule on oil, mining payments to foreign governments

    The U.S. Securities and Exchange Commission on Monday approved a rule requiring oil, gas and mining companies to disclose payments made to foreign governments, capping a process stalled in the courts for years.

    The rule requires companies to state publicly starting in 2018 how much they pay governments in taxes, royalties and other types of fees for exploration, extraction and other activities.

    It will "provide enhanced transparency," SEC Chair Mary Jo White said in a statement.

    Frustrated with delays, human rights group Oxfam in 2014 sued the SEC over the rule, which was mandated by the Dodd-Frank Wall Street Reform Law passed four years earlier. In September, a federal judge ordered the commission to fast-track the rule, setting Monday as a deadline. Regulators released a draft in December.

    "After six years, we are very pleased to see the SEC release final rules that align with those in other markets by requiring fully public, company-by-company, project-level reporting with no categorical exemptions,” said Ian Gary, associate policy director at Oxfam America, in a statement. "This is a huge victory for investors and for citizens in resource-rich countries around the world who wish to follow the money their governments receive from oil and mining companies."

    The rule will cover major corporations such as Exxon, Chevron and Shell, as well as state-owned companies in China and Brazil, according to Oxfam.

    Under the final rules, "resource extraction" companies must disclose payments made to further the commercial development of oil, natural gas or minerals and that total more than $100,000 during a single fiscal year for each of their projects. Those payments can include taxes, royalties, fees, bonuses, dividends and social responsibility payments. Companies must disclose payments made by their subsidiaries, or any other entities they control, as well.

    The rule exempts a company from reporting payment information for a firm it has acquired in the first year after the acquisition, and also allows companies to delay disclosure for a year on payments related to exploration.

    The SEC said its new regulation is in line with approaches used in the European Union and Canada. The Dodd-Frank Wall Street reform law included a requirement for extraction companies to report annually on their payments to foreign governments as a way to combat corruption in places where oil drilling and mining dominate the local economy.
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    Temer named in new bribery allegations

    New evidence has reportedly been brought forward against Brazil's interim President Michel Temer who is accused of allegedly taking bribes from engineering player Engevix.

    Under these latest allegations, Temer is said to have received $1 million reals ($296,000) from Engevix's boss Jose Antunes Sobrinho, Brazilian magazine Epoca reported.

    According to the report, the allegations were made by Antunes in an effort to secure a plea bargain with federal authorities, as he is currently under house arrest over corruption charges.

    In his proposed plea bargain, Antunes reportedly alleges that Temer received bribes from the owner of Sao Paulo-based architecture firm Argeplan, Joao Batista Lima, in exchange for contracts.

    Antunes said that he can bring evidence to support his allegations, as Argeplan was awarded a contract to build Angra III, a unit of Brazil's sole nuclear power plant, Epoca reported.

    Antunes is under investigation for allegedly bribing officials of Eletronuclear, the nuclear-generation unit of Eletrobras, to win contracts.

    Temer has already been caught up in Brazil's massive corruption involving bribes and kickback schemes at state-run player Petrobras.

    He denied earlier this month accusation brought forward by the former president of Petrobras' transport division Transpetro, Sergio Machado, who has been giving plea bargain evidence to prosecutors in the investigation.

    Machado told prosecutors that Temer, among others, had asked him for illegal campaign contributions. Machado, who is himself accused of corruption, said Temer requested the donation for his Brazilian Democratic Movement Party (PMDB) party's candidate's campaign in the mayoral elections in Sao Paulo in 2012.

    Temer, who took office after President Dilma Rousseff was suspended to face an impeachment trial, denied asking for illegal contributions to his party's electoral campaigns.

    So far, there have been no statements from Temer's office regarding the latest corruption allegations against him.
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    Overweight Resources.

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    China May industrial profit growth slows to 3.7 percent year-on-year

    Profits of Chinese industrial companies rose 3.7 percent in May from a year earlier, slowing from April's pace and adding to concerns that the world's second-largest economy may be losing some momentum.

    A return to profit growth in the first quarter and a strong jump in March in particular had fueled hopes that China's economy was perking up, but data since then has suggested it may be stabilizing at best.

    "The continued slowdown in May profit growth further supports our view that growth momentum has remained weak or possibly weakened further," economists at Nomura said in a note.

    "We maintain our forecast for a slowing of real GDP growth to 6.3 percent year-on-year in Q2 from 6.7 percent in Q1."

    Profits in May rose to 537.2 billion yuan ($81.21 billion), the statistics bureau said on Monday.

    In the first five months of this year, profits rose 6.4 percent compared with the same period last year, the National Bureau of Statistics said on its website.

    But the performance was uneven across sectors, with profits in the mining sector falling 93.8 percent from a year earlier, the bureau said.

    Industrial profits in January-April rose 6.5 percent from a year earlier, with April up 4.2 percent.

    "Growth in industrial profits slowed down slightly in May compared with the previous month, but positive changes have emerged from the industrial sectors," NBS official He Ping said in a statement accompanying the data.

    He added that profits of energy and raw material sectors including coal, steel and non-ferrous industries saw a resumption of growth in May.

    In May, profits of the coal mining sector grew 2.5 times from a year earlier, snapping a falling streak over the past few years, the bureau said.

    The pick-up in profits in these sectors might be an indication that Beijing's efforts to remove excessive capacity, particularly in the coal and steel sectors, may be starting to have an effect.

    The central government will earmark 27.64 billion yuan to help local governments pay for capacity closures in these two sectors this year.

    China's top economic planner said on Sunday that it planned to cut steel capacity by 45 million tonnes and lower coal output capacity by 280 million tonnes.

    Chinese industrial firms' debt at the end of May was 4.9 percent higher than at the same point last year.

    The data covers large enterprises with annual revenue of more than 20 million yuan from their main operations.

    Profits at China's state-owned firms fell 9.6 percent in the first five months of 2016 from a year earlier, wider than the a 8.4 percent fall in the first four months, the Ministry of Finance said last week.

    Producer prices fell at their slowest rate in May since November 2014, supported by a government investment spree and higher commodity prices. On a monthly basis, producer prices rose 0.5 percent, the third increase in a row.
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    BHP lifts exploration spending by nearly 30 percent, targets copper and oil

    BHP lifts exploration spending by nearly 30 percent, targets copper and oil

    BHP Billiton said on Monday it plans to boost its exploration budget by 29 percent to around $900 million next year, as the global miner counts on new finds of oil and copper to drive growth in a tough market rather than mergers and acquisitions.

    The figure represents 18 percent of BHP's total capital budget of $5 billion over fiscal 2017 and comes amid efforts by big miners to maintain growth while tightening balance sheets.

    In December, BHP had projected total fiscal 2016 exploration spending of $700 million.

    The lift in exploration spending comes as a flurry of M&A deals earlier this year slows, with fewer assets than expected coming up for sale, leaving mining companies to rely on their own projects to grow.

    Petroleum exploration by BHP will focus on deepwater basins in the Gulf of Mexico, the Caribbean and the Northern Beagle basin, off the coast of Western Australia, the company's head of geoscience, Laura Tyler, told a Citigroup investors' briefing.

    Copper exploration is targeting deposits in Chile, Peru, the United States, Canada and South Australia, according to Tyler.

    "We are investing at a time when most in our sector continue to reduce discretionary spend," Tyler said.

    Earlier this year, BHP Chief Executive Andrew Mackenzie told investors he anticipated capital and exploration spending of around $7 billion in the financial year ending June 30 and no more than $5 billion in the 2017 financial year.

    "BHP is effectively letting the market know it will be spending more of a lower capex budget on exploration, emphasizing petroleum and copper," said Shaw and Partners mining analyst Peter O'Connor. "It's where they see the best growth."

    Big miners such as BHP and Rio Tinto haven't ruled out large acquisitions, but have noted few so-called tier-one assets up for sale by rival companies hit harder by a downturn in the sector.

    "M&A isn't off the agenda, but BHP isn't waiting around for the next big opportunity," O'Connor said.

    Separately, Rio Tinto group executive for growth & innovation, Stephen McIntosh, told the Citi briefing the company was seeing a renewed focus on greenfield projects and a bias toward copper.

    "However this is not our exclusive focus and we still have a significant proportion of our expenditure on other commodities," McIntosh said.
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    Brexit: Reaction and Future?

    The messages come from everywhere, there is a disenchantment of the European people in Europe, we can understand. It seems like an incomprehensible bureaucratic machine, incapable of restoring growth and employment, powerless to control our borders" , did he declare. According to the election, "the biggest mistake we could make would be to suggest that 27 [member states of the European Union], we will continue as before," he said. "We can not continue as before. We must write a new page, a new chapter in Europe ."

    ~Alain Juppe, rightist candidate for the presidency. 

    You attended the shocks of the Union since 2008 and you understand that the Union could die under the weight of its contradictions, its paralysis, its compromises and mediocrity of its national leaders fueling skepticism more and stronger in respect of a European project made responsible for all national problems. So you decided to give us a big kick in the rear: 

    ~Jean Qatremer, La liberation.

    The continent has been too rigid in recent years, too narcissistic, too comfortable. Some Brexiteers even posed justifiable questions. What if, for example, the EU has already fulfilled its primary function of securing peace and prosperity in Europe? What if the citizens of Europe no longer want deeper ties between their countries? Must "more Europe" really always be the only answer to everything?

    The European Union now has the opportunity to reinvent itself. But it also needs to consider new, looser forms of memberships for countries like Britain or Turkey that want to conduct trade but either do not want to be or cannot be part of an ever-closer community. Next week, EU leaders will meet in Brussels for their first post-Brexit summit. It has to be the start of a new beginning. That's the only chance we have left.

    ~Der Speigel.

    "No Immigrants, No Trade"?

    ~Anon, American observer reading the sub text.

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    Oil and Gas

    Gazprom H1 gas exports to Europe up 14% year-on-year: CEO

    Gazprom's gas sales in Europe in the first half of 2016 rose by 14.2%, or 10.6 Bcm, compared with the same period of last year, Gazprom CEO Alexei Miller said Thursday, signaling a sharp slowdown in export growth in the second quarter of this year.

    Addressing Gazprom's annual general meeting in Moscow, Miller also hailed the utilization rate of Russia's Nord Stream gas pipeline to Europe, which, he said, far outweighed that of LNG imports.

    Speaking of Gazprom's supplies to Europe and Turkey in the first half, Miller provided no absolute figures.

    But according to Platts' analysis of Gazprom data, a 10.6 Bcm increase on the 74.3 Bcm sold in Europe and Turkey (excluding the former Soviet Union states) in the first half of 2015 means H1 2016 sales of 84.9 Bcm.

    This puts Gazprom well on track to reach its most recently stated target from May of total exports to Europe and Turkey in 2016 of 165 Bcm.

    However, the 10.6 Bcm increase in the first half confirms that the growth in Gazprom's gas sales to its core foreign markets stalled in the second quarter after strong growth at the start of the year.

    In the first quarter, Gazprom's sales in Europe and Turkey were up 10 Bcm on the same period of 2015, meaning that supply growth was just 0.6 Bcm in Q2.

    In the first quarter of 2016, sales to Europe and Turkey totaled 44.4 Bcm, according to official Gazprom data, which was up 29% from 34.4 Bcm in Q1 2015.

    This suggests Q2 sales of 40.5 Bcm.

    "The share of import gas in European consumption currently amounts to nearly 50%," Miller said.

    "Europe's demand for additional imports will grow by no less than 100 Bcm/year by 2025, and can rise to 150 Bcm/year by 2035," Miller said.

    He said that data from 2015 showed that trunk gas pipeline supply enjoys greater demand than LNG in Europe.

    "While only one quarter of European LNG capacity was utilized last year, gas deliveries via Nord Stream grew despite regulatory [restrictions]," he said, a likely reference to the constraints on the use of the OPAL gas pipeline in eastern Germany. Under a 2009 decision by German energy regulator Bundesnetzagentur and approved by the European Commission, Gazprom is limited to using a maximum 50% of the capacity of the 36 Bcm/year OPAL pipeline, which connects the Nord Stream to the European pipeline grid.
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    Chevron Deadline Nears for $40 Billion Bet on Next Decade’s Oil

    Chevron Corp. may shortly give a green light to the most expensive oil project in the world this year as the industry digs out from the worst slump in a generation.

    The company said this week in a presentation on its website that the decision on expanding the Tengiz development in Kazakhstan will be made in mid-2016. Installing 4,500 camp beds for construction crews is done and port dredging 25 percent complete, it said. The project may cost as much as $40 billion and add crude supply equivalent to that of Libya. The investment was put on hold last year after cost estimates ballooned amid plunging oil prices.

    In a May interview, Kazakh Energy Minister Kanat Bozumbayev predicted a late-June approval and estimated the cost at $36 billion to $37 billion. Wood Mackenzie Ltd. said it could reach $40 billion. Chevron spokesman Kurt Glaubitz declined to comment on the pace of the Chevron board’s deliberations or the projected price tag.

    “This is very big and very important for Chevron and for Kazakhstan,’’ said Matthew Sagers, the Washington-based managing director of Russian and Caspian energy research at consulting firm IHS Inc. “It shows that the situation is now turning in the oil market that people are putting down this kind of money.’’

    The Tengiz expansion would come after oil explorers around the globe slashed more than $1 trillion in investments to weather a downturn that saw U.S. crude tumble 75 percent from June 2014 to last February. Hundreds of thousands of drillers, engineers and geologists were fired and the contagion spread to steel mills, trucking and lodging companies. The project represents a bullish bet that oil demand will continue to grow through the next decade and beyond, according to IHS.

    For Chevron, the squeeze meant writing off hundreds of millions of barrels of deepwater discoveries in the U.S. Gulf of Mexico and elsewhere. The San Ramon, California-based explorer slashed annual spending plans for 2017 and 2018 to between $17 billion and $22 billion each year, a reduction of about 26 percent from this year.

    Chevron’s 50 percent ownership interest in Tengiz means it has more at stake than its partners: Exxon Mobil Corp., Kazmunaigaz National Co. and Lukoil PJSC. The field already accounts for almost one-fifth of Chevron’s worldwide oil production.

    Tengiz Production

    Tengiz produced about 595,000 barrels a day last year, according to Tengizchevroil, the partnership that operates the field. The expansion will involve pumping sulfur-laden gas back into the rocks to force out an additional 250,000 to 300,000 barrels a day.

    “Tengiz has been very lucrative for Chevron for many years,’’ said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, who has a “buy’’ rating on the shares. “It’s one of the few projects in that part of the world that worked as planned.’’

    It’s also the only major new project Chevron spared from the austerity budget imposed this year to cope with the slump in crude prices and cash flow. The partnership probably will issue bonds or otherwise tap lenders to finance the expansion, Chairman and Chief Executive Officer John Watson told analysts and investors at the company’s annual strategy presentation in March.

    Technically Challenging

    Discovered in 1979, Tengiz was too technically challenging for Soviet engineers to develop. A blowout in a well called T-37 in June 1985 blazed for more than 400 days before it was extinguished by U.S. well-control experts, according to a history of the field published by Tengizchevroil.

    Chevron won the rights to develop the field in 1993 after the collapse of the Soviet Union. Tengiz produces a very light form of crude oil, highly prized by refiners because of its high gasoline yield, Sagers of IHS said.

    The Tengiz expansion probably will begin pumping barrels in 2021 or 2022, said Samuel Lussac, research manager for Caspian upstream oil and gas at Wood Mackenzie in Edinburgh. The combination of new Tengiz supplies and output from the Kashagan project set to come online later this year could boost Kazakhstan’s daily output to more than 2 million barrels, vaulting it past countries including Norway and Qatar.

    “This will be like another small producing nation coming online,’’ Sagers said.

    Chevron classifies the Tengiz expansion as one of just 13 major capital projects in the company’s portfolio spread across five continents, according to a June 28 presentation published on its website.

    “Kazakhstan is right at the top for them in the world,’’ Youngberg said.
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    Canada court overturns federal approval of Enbridge oil pipeline

    A Canadian court has overturned the approval of Enbridge Inc's Northern Gateway oil pipeline, again delaying a project fiercely opposed by environmentalists and many aboriginal groups.

    The Federal Court of Appeal ruled in a 2-to-1 decision released on Thursday that the government had failed in its duty to consult with aboriginal groups on the project and sent the matter back to Prime Minister Justin Trudeau's cabinet for a "prompt redetermination."

    Calgary-based Enbridge said in a statement that it remains "fully committed" to building the C$7.9 billion ($6.1 billion) pipeline and that it was working with partners, including aboriginal groups who support the project, to determine the next steps.

    Canada's former Conservative government in 2014 approved Northern Gateway, which would carry oil from the Alberta oil sands to a port in British Columbia for export. Its construction was subject to more than 200 conditions.

    After the approval, numerous British Columbia aboriginal communities, along with environmental groups, filed lawsuits seeking to overturn the decision.

    In its 153-page judgment, the court determined that Canada's consultation with aboriginal communities, also known as First Nations, was "brief, hurried and inadequate." It said the government failed to grapple with their concerns and had not shown any intention to correct any errors or omissions in the original regulatory panel review.

    "Missing was a real and sustained effort to pursue meaningful two-way dialogue. Missing was someone from Canada's side empowered to do more than take notes, someone able to respond meaningfully," the judges wrote.

    The court also noted that it would have taken little time and effort to meaningfully engage with First Nations, but that it was not done. Trudeau's cabinet will now have to fulfill that duty before a new permit can be issued.

    In April, Trudeau said he opposed the pipeline. His government has promised a moratorium on oil tanker traffic along the coast of northern British Columbia, a policy seen making the pipeline unfeasible.

    In a statement Thursday, the government said it will review the ruling before determining next steps and reaffirmed its vow to build a "nation-to-nation" relationship with aboriginals.

    The court's decision was heralded by project critics, who said it shuts the door on the 1,177-km (730-mile) pipeline.

    "This pipeline will never be built. This is a victory," Sven Biggs, a representative of one of the environmental groups in the lawsuit, said in a statement.
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    U.S. shale oil's Achilles heel, decline rates, shows signs of mending

    Since the beginning of the U.S. fracking revolution, oil producers have struggled with a vexing problem: after an initial burst, crude output from new shale wells falls much faster than from conventional wells.

    However, those well decline rates have been slowing across the United States over the past few years, according to data analysis provided exclusively to Reuters.

    The trend, if sustained, would help ameliorate the industry’s most glaring weakness and cement its importance for worldwide production in years to come. It also helps explain shale drillers' resilience throughout the oil market's two-year slump.

    While shale oil production revolutionized the oil industry over the past decade, bringing abundance of global oil supplies, high costs and rapid production declines have been its Achilles heel. That is beginning to change thanks to technological innovation and producers' focusing less on maximizing output and more on improving efficiency and productivity.

    According to data compiled and analyzed by oilfield analytics firm NavPort for Reuters, output from the average new well in the Permian Basin of West Texas, the top U.S. oilfield, declined 18 percent from peak production through the fourth month of its life in 2015. That is much slower than the 31 percent drop seen for the same time frame in 2012 and the 28 percent decline in 2013, when the oil price crash started.

    The change was even more dramatic in North Dakota's Bakken shale, where four-month decline rates for new wells fell to 16 percent in 2015 from almost 31 percent in 2012. (

    A slower decline means producers need to drill fewer new wells to sustain output, said Mukul Sharma, professor of petroleum engineering at the University of Texas at Austin.

    "You can have cash flow without having to expend a lot of capital."

    The recent decline rates mark a dramatic improvement from first-year 90 percent declines in the early years of the shale boom that made some investors question the sector's long-run viability.


    There are no 2016 figures yet, but oil executives expect the trend to continue this year and beyond.

    Scott Sheffield, chief executive of Pioneer Natural Resources Co (PXD.N), a top Permian producer, credited improved fracking techniques for helping stabilize production, which shareholders rewarded by lifting Pioneer's shares up about 9 percent over the past year.

    "We're exposing more of the reservoir and breaking it up so we don't get as sharp a decline," Sheffield told a recent energy conference.

    Slower declines also reflect producers' more conservative approach to operating wells. In the early years of the hydraulic fracturing boom, high crude prices encouraged operators to boost initial production as much as possible.

    To do this, they would let wells flow fast by keeping pressure low on the ground's surface. About seven years ago, however, some shale operators in Louisiana found this ultimately hurt production later on by causing rock fractures to shut.

    Now, many operators maintain surface pressures higher, which limits initial flow rates and slows a well's decline rate.
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    InterOil gets unsolicited takeover offer from unnamed bidder

    InterOil Corp, which agreed last month to be acquired by Australia's Oil Search Ltd, said it had received an unsolicited offer from an unnamed bidder.

    InterOil said on Thursday that it had agreed with Oil Search to engage in further talks with the third party.

    In May, InterOil agreed to be acquired by Oil Search in a $2.2 billion deal.
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    Soaring gas prices trigger fears of Tasmania-style energy crisis

    Soaring east coast gas prices due to the cold snap and rising demand from the Queensland LNG projects have triggered fears among manufacturers about a Tasmanian-style energy crisis that would lead to losses.

    The first prolonged period of chilly temperatures this winter stretching along the east coast has come just after the start up of the fifth of Queensland's six LNG export trains and has driven short-term wholesale prices sharply higher over the past week.

    Wholesale gas prices in Sydney for Thursday reached almost $29 a gigajoule, about 60 per cent higher than their peak in 2012.

    The spike means industrial gas buyers relying on the short-term market for part of their supplies will be paying more than three times as much as Japan is paying for importing LNG.

    The price squeeze has raised fears among gas buyers that they are one step away from being asked to cut back their consumption to preserve supplies for households, just as industrial electricity users had to in the recent Tasmanian hydro-power crisis.

    "In a worst-case situation we would be asked to offload, and the community then has really got to make the decision do they want to keep people in work or do they want to keep their houses heated," said Brickworks managing director Lindsay Partridge, recalling just such a situation in southern California in the early 1980s.

    "The reason of course the price is up is because there's a shortage, so if there was an extended cold snap or there was some minor outage it would ricochet across the entire east coast very rapidly,"

    Ben Eade, executive director of Manufacturing Australia, said the combined impact of the cold and the fifth LNG train starting up in Gladstone was placing "significant pressure" on short-term domestic gas markets, just as gas buyers had been warning.

    "It's not just about the spiking prices: large gas users remain concerned about the risk to their operations of gas curtailment if sudden demand spikes exceed available supply on very cold days," Mr Eade said.

    Last Friday saw the first cold weather-driven demand "event", as termed by the Australian Energy Market Operator, when the spot gas price in Victoria exceeded $20 a gigajoule for a four-hour period. Prices spiked on Wednesday in Brisbane, reaching $11.95, while prices in Adelaide recently touched $18.99.

    Historically, wholesale prices were typically $3-$4 a gigajoule, although in recent years contract tariffs have risen to $6-$8 a gigajoule or higher, if they can be secured at all.

    Mr Partridge said Brickworks had only been able to lock in gas supplies to the end of 2017.

    "No one will write you a contract beyond 2018 at any price, so that makes things very concerning," he said.

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    ExxonMobil confirms significant oil discovery offshore Guyana

    Exxon Mobil Corporation today said that drilling results from the Liza-2 well, the second exploration well in the Stabroek block offshore Guyana, confirm a world-class discovery with a recoverable resource of between 800 million and 1.4 billion oil-equivalent barrels.

    'We are excited by the results of a production test of the Liza-2 well, which confirms the presence of high-quality oil from the same high-porosity sandstone reservoirs that we saw in the Liza-1 well completed in 2015,' said Steve Greenlee, president of Exxon Mobil Exploration Company. 'We, along with our co-venturers, look forward to continuing a strong partnership with the government of Guyana to further evaluate the commercial potential for this exciting prospect.'

    The Liza wells are located in the Stabroek block approximately 120 miles (193 kilometers) offshore Guyana. Data from the successful Liza-2 well test is being assessed.

    The Liza-2 well was drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Ltd., approximately 2 miles (3.3 km) from the Liza-1 well. The Liza-2 well encountered more than 190 feet (58 meters) of oil-bearing sandstone reservoirs in Upper Cretaceous formations. The well was drilled to 17,963 feet (5,475 meters) in 5,551 feet (1,692 meters) of water.

    'This exploration success demonstrates the strength of our long-term investment approach, as well as our technology leadership in ultra, deepwater environments,' said Greenlee.

    The Stabroek block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
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    Southwestern Floats $1.1B of New Stock, Offers to Buy Back IOUs

    Earlier this week MDN told you that Southwestern Energy, a major Marcellus/Utica driller, has cut deals with its banks and debholders to extend out the due date on loans coming due.

    Southwestern continues to aggressively manage its money and balance sheet. Yesterday the company announced it is floating $1.1 billion of new stock and plans to buy back outstanding notes (IOUs). We don’t pretend to understand why they would extend the due dates earlier this week and now attempt to buy back the IOUs. Perhaps it’s different sets of debt?
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    Stone Energy Opens Marcellus Spigots Again; New Midstream Deal

    Are we seeing the beginning of a trend? Yesterday MDN told you that after saying they would only drill a single Marcellus well and were curtailing production in the northeast, Eclipse Resources had turned that around and decided to drill 10-12 new wells, complete 24 wells and open up the spigots to shut-in wells once again.

    Today we bring you news that Stone Energy has cut a new midstream gathering agreement with Williams and is returning some of their shut-in Marcellus wells to full production. Sure feels like things are beginning to look up!…
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    Triangle USA Petroleum, Oil and Gas Explorer, Files Bankruptcy

    Triangle USA Petroleum Corp., an oil and gas explorer working one of the largest shale oil reservoirs in North America, filed for bankruptcy with a plan to restructure that will keep its parent company out of Chapter 11.

    Triangle USA is active in the North Dakota and Montana regions of the Williston Basin, where it uses horizontal drilling and hydraulic fracturing. The company and its affiliates fell victim to the price slump that began in 2014, and bankruptcy proceedings were started “with the objective of realigning their capital structure with new market realities,” Chief Restructuring Officer John Castellano said in papers in Delaware federal court.

    After several months of negotiations, the company reached an agreement with holders of 73 percent of its senior unsecured notes and plans to get out of bankruptcy by converting the debt into equity in a new, restructured business.

    Parent Triangle Petroleum Corp. and an oilfield services affiliate, RockPile Energy Services LLC, weren’t included in Wednesday’s Chapter 11 filing. They and the bankrupt unit intend to keep operating, while a subsidiary that ceased operations this year, Ranger Fabrication LLC, was included in the bankruptcy case and will wind down under court protection.

    As of the bankruptcy, Triangle USA had more than $689 million in long-term debt, including $308 million in a reserve-based revolving credit facility and $381 million in 6.75 percent 2022 senior unsecured notes. Those notes will be converted into equity and a new money rights offering for $100 million will be backstopped by participating noteholders, according to a company statement.

    The arrangement still needs court approval and Triangle USA will keep negotiating with bank lenders in its senior reserve-backed facility and parties with which it has midstream agreements, including affiliates of joint venture Caliber Midstream Partners LP, according to the statement.

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    OPEC oil output hits record high in June on Nigerian rebound

    OPEC's oil output has risen in June to its highest in recent history, a Reuters survey found on Thursday, as Nigeria's oil industry partially recovers from militant attacks and Iran and Gulf members boost supplies.

    Higher supply from major Middle East producers except Iraq underlines their focus on market share. Talks in April between producers on freezing output failed and have not been revived as a recovery in prices to $50 a barrel reduces the urgency to prop up the market.

    Supply from the Organization of the Petroleum Exporting Countries has risen to 32.82 million barrels per day (bpd) this month, from a revised 32.57 million bpd in May, the survey based on shipping data and information from industry sources found.

    That June output figure would be less than the average demand OPEC expects for its crude in the third quarter, suggesting demand could exceed supply in coming months if OPEC does not pump more than current levels.

    "We could see a slight supply deficit - it depends on further development of unplanned outages," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

    OPEC's June output exceeds January's 32.65 million bpd, when Indonesia's return as an OPEC member boosted production and output from the other 12 members was the highest in Reuters survey records, starting in 1997.

    Supply has surged since OPEC abandoned in 2014 its historic role of cutting supply to prop up prices.

    The biggest increase in June of 150,000 bpd came from Nigeria, where output had fallen to its lowest in more than 20 years due to militant attacks on oil facilities, due to repairs and a lack of major new attacks since mid-June.

    Iran managed a further supply increase after the lifting of Western sanctions in January, sources in the survey said, although the pace of growth is slowing.

    Gulf producers Saudi Arabia and the United Arab Emirates increased supply by 50,000 bpd each, the survey found. Saudi output edged up to 10.30 million bpd due to higher crude use in power plants to meet air-conditioning needs.

    "Exports are fairly flat, refinery runs are flat and crude direct burn is up, so directionally supply is up from May," said an industry source who monitors Saudi output.

    Libyan output rose by 40,000 bpd after the reopening in late May of the Marsa al Hariga export terminal, the survey found. Supply is still a fraction of the pre-conflict rate.

    Among countries with declining supply, Iraq pumped less for a second month. Exports in the south of the country have been trimmed by maintenance work, power cuts and higher domestic demand, Iraqi officials say.

    Venezuela's supply is under downward pressure from its cash crunch.

    The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, OPEC and consulting firms.
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    Norway oil wage talks begin could affect 6% of production

    Norway oil wage talks begin could affect 6% of production

    Energy companies and trade unions in Norway began two-day wage talks on Thursday in a bid to avert a strike that would cut output from Europe's largest oil producer by 6 percent, the Norwegian Oil and Gas Association (NOG) said.

    Oil and gas production at five offshore fields could be shut from July 2 if no compromise is found, NOG said, and the strike could spread subsequently.

    The five fields are ExxonMobil's Balder, Ringhorne and Jotun, Engie's Gjoea and Wintershall's Vega.

    That would cut Norway's output by 229,000 barrels of oil equivalents per day, said NOG, which negotiates on behalf of the energy firms.

    Hundreds of workers on eight oil platforms operated by Norway's Statoil would also strike but output would be maintained, NOG said.

    About 755 workers would go on strike initially, while a protracted conflict could eventually affect more than 7,400 workers, data from the mediator's office showed.

    Rules governing labor disputes in Norway give the government the power to force an end to strikes under certain conditions, including when national interests are considered to be at stake.
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    Expanded Panama Canal reduces travel time for shipments of U.S. LNG to Asian markets

    Image title

    The newly expanded Panama Canal will be able to accommodate 90% of the world's current liquefied natural gas (LNG) tankers with LNG-carrying capacity up to 3.9 billion cubic feet (Bcf). Prior to the expansion, only 30 of the smallest LNG tankers (6% of the current global fleet) with capacities up to 0.7 Bcf could transit the canal. The expansion has significant implications for LNG trade, reducing travel time and transportation costs for LNG shipments from the U.S. Gulf Coast to key markets in Asia and providing additional access to previously regionalized LNG markets.

    The new locks in the canal provide access to a wider lane for vessels and are 180 feet across, compared with 109 feet in the original locks. Only the 45 largest LNG vessels, 4.5-Bcf to 5.7-Bcf capacity Q-Flex and Q-Max tankers used for exports from Qatar, will not be able to use the expanded canal.

    Transit through the Panama Canal will considerably reduce voyage time for LNG from the U.S Gulf Coast to markets in northern Asia. Four countries in northern Asia—Japan, South Korea, China, and Taiwan—collectively account for almost two-thirds of global LNG imports. A transit from the U.S. Gulf Coast through the Panama Canal to Japan will reduce voyage time to 20 days, compared to 34 days for voyages around the southern tip of Africa or 31 days if transiting through the Suez Canal. Voyage time to South Korea, China, and Taiwan will also be reduced by transiting through the Panama Canal.

    The wider Panama Canal will also considerably reduce travel time from the U.S. Gulf Coast to South America, declining from 20 days to 8-9 days to Chilean regasification terminals, and from 25 days to 5 days to prospective terminals in Colombia and Ecuador. For markets west of northern Asia, including India and Pakistan, transiting the Panama Canal will take longer than either transiting the Suez Canal or going around the southern tip of Africa.

    In addition to shortening transit times, using the Panama Canal will also reduce transportation costs. The Panama Canal Authority has introduced new toll structures for LNG vessels designed to encourage additional LNG traffic through the Canal, especially for round trips. Transit costs through the Panama Canal for an average 3.5 Bcf LNG carrier are estimated at $0.20 per million British thermal units (MMBtu) for a round-trip voyage, representing about 9% to 12% of the round-trip voyage cost to countries in northern Asia.

    Based on IHS data, the round trip voyage cost for ships traveling from the U.S. Gulf Coast and transiting the Panama Canal to countries in northern Asia is estimated to be $0.30/MMBtu to $0.80/MMBtu lower than transiting through the Suez Canal and $0.20/MMBtu to $0.70/MMBtu lower than traveling around the southern tip of Africa. Transiting the Panama Canal offers reduction in transportation costs to northern Asian countries such as Japan, South Korea, Taiwan, and China and may offer some minimal cost reductions to countries in southeast Asia (Malaysia, Thailand, Indonesia, and Singapore), depending on transit time. U.S. LNG exports to India, Pakistan, and the Middle East are not expected to flow through the Panama Canal because alternative routes, either the Suez Canal or around the southern tip of Africa, have lower transportation costs.

    Currently, about 9.2 billion cubic feet per day (Bcf/d) of U.S. natural gas liquefaction capacity is either in operation or under construction in the United States. By 2020, the United States is set to become the world's third-largest LNG producer, after Australia and Qatar. More than 4.0 Bcf/d of U.S. liquefaction capacity has long-term (20 years) contracts with markets in Asia, of which 3.2 Bcf/d is contracted to Japan, South Korea, and Indonesia.

    An additional 2.9 Bcf/d of U.S. liquefaction capacity currently under construction has been contracted long-term to various countries. Flexibility in destination clauses allows these contracted volumes to be taken to any LNG market in the world. Assuming all contracted volumes transit the Panama Canal, EIA estimates that LNG traffic through the Canal could reach more than 550 vessels annually, or 1-2 vessels per day, by 2021.

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    Oil Bulls Beware Because China’s Almost Done Amassing Crude

    One of the pillars of oil’s recovery from the lowest price in 12 years may be on the verge of crumbling.

    China is likely close to filling its strategic petroleum reserves after doubling purchases for it this year as prices plunged, JPMorgan Chase & Co. analysts including Ying Wang wrote in a June 29 research note. Stopping shipments for the reserve would wipe out about 15 percent of the country’s imports, according to the bank.

    Chinese crude imports have risen 16 percent this year, and the country is rivaling the U.S. as the world’s biggest oil purchaser. That demand, along with supply disruptions from Canada to Nigeria, has helped boost oil prices about 80 percent since January.

    “China has taken the opportunity of lower oil prices since early-2015 to accelerate the strategic petroleum reserve builds,” Wang said in the report. “This volume might be close to the capacity limit, in our view, and together with potential teapot utilization pullback and slower-than-expected demand from China could increase near-term risks to global oil prices.”

    Chinese imports surged to a record 8.04 million barrels a day in February. The nation may surpass the U.S. as the world’s largest crude importer this year with average inbound shipments of 7.5 million barrels a day, according to Zhong Fuliang, vice president with China International United Petroleum & Chemicals Co., the trading arm of the nation’s biggest refiner.


    China finished building the first phase of its strategic petroleum reserve program with four sites in 2009, totaling 91 million barrels, according to the National Bureau of Statistics. The second-phase will be completed by 2020, according to the 2016-2020 Five Year Plan released in March.

    The Chinese government doesn’t regularly report the capacity or storage level of its strategic reserves. JPMorgan calculated the surplus crude available to go into the SPR by subtracting how much oil is refined into fuels or sent to commercial inventories from the combined volume of the domestic crude output and net imports. The surplus is about 1.2 million barrels a day this year, up from 491,000 last year, and adds up to about 400 million barrels in total, the bank estimates.

    The bank assumes the capacity for the reserves is about 511 million barrels, based on government plans cited by state media. At the current rate of stockpiling, the storage would fill up by August, leading to a potential import drop in September.

    “We do not believe the 16 percent growth in oil imports year-to-date is sustainable despite a domestic oil production decline, as demand is weak, if inventory capacity reaches the limit,” the bank said.
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    Saudi Aramco Cuts All August Oil Prices for U.S., Asian Clients

    Saudi Arabia, the world’s largest crude exporter, cut all official selling prices for its crude sales to Asian and U.S. clients in August.

    State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude to Asia by 40 cents to a premium of 20 cents a barrel above a regional benchmark, the company known as Saudi Aramco said in an e-mailed statement Thursday. The company had been expected to cut the premium for shipments of Arab Light crude by 25 cents to 35 cents a barrel more than the benchmark for buyers in Asia, according to the median estimate in a Bloomberg survey of seven refiners and traders in the region.

    Brent crude has dropped more than 35 percent since Saudi Arabia led a 2014 decision by the Organization of Petroleum Exporting Countries to maintain production to drive out higher-cost producers. The group decided to stick to its policy of unfettered production at its June 2 meeting in Vienna, with ministers united in their optimism that global oil markets are improving.

    Saudi Arabia considers the global oil glut to be over, its Energy Minister Khalid Al-Falih told the Houston Chronicle in an interview this month. The comments echo views of the International Energy Agency, which said on June 14 that the crude market will be balanced in the second half.

    All other official selling prices for Asian clients were also reduced, the statement showed. The biggest cut was by 90 cents a barrel for Extra Light, to a premium of $1.70 a barrel above an Oman/Dubai benchmark. U.S. prices were all lowered compared with July. Again, the largest reduction was Extra Light. Its premium was lowered to $1.70 a barrel above its benchmark, compared with $2.10 for July.

    Middle Eastern producers are competing with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

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    Saudi sells more light crude to Asia, piles pressure on rivals

    Saudi Arabia will supply more Arab Extra Light crude to at least two buyers in Asia in July, four sources familiar with the matter said on Thursday, as the top oil exporter ramps up shipments in a bid to claim a bigger share of the Asian market.

    Saudi Arabia has traditionally accounted for most of the crude imports by Asia, the world's biggest oil consuming region, but recently its position has been challenged with Russia overtaking it as China's top supplier in the past three months.

    The kingdom, however, has responded by pumping and shipping more following an oilfield expansion, a move that traders say could pressure rival producers - such as the United Arab Emirates (UAE) and Russia - and knock down prices in Asia.

    In fact, state oil giant Saudi Aramco has already found buyers for its additional output in July, with some customers in Asia lifting 10 percent more than contracted volumes, the sources told Reuters on Thursday.

    The OPEC kingpin kept the official selling price (OSP) for Arab Extra Light unchanged in July, contrary to expectations for a hike, to accommodate a 33 percent rise in output from an expansion at the Shaybah oilfield.

    "They are really pushing hard," a trader with a North Asian refiner said.

    Saudi Arabia could next cut OSPs for August to retain its competitive edge over rivals during what is expected to be a season for weak demand in Asia as several refineries shut for maintenance in the third quarter.

    Already, a near doubling of Asia's crude benchmark Dubai DUB-1M-A from the first quarter has depressed Asian refining margins. The resultant low demand has hit values for rival light grades like UAE's Murban and Russian ESPO.

    "UAE would be most affected if Saudi boosted sales," a second Asian crude buyer said.

    Murban MUR-1Madn- cargoes loading in August sold at discounts against their OSP, while ESPO premiums ESPO-DUB were mostly below $2 a barrel against Dubai quotes, the lowest in at least eight months.

    "China used to be the biggest buyer (of ESPO crude) but they have slowed down a lot," a Singapore-based trader said.
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    Nigeria signs $80 bln of oil, gas infrastructure deals with China

    Nigeria has signed oil and gas infrastructure agreements worth $80 billion with Chinese companies, the West African country's state oil company said on Thursday.

    Nigeria, an OPEC member which was until recently Africa's biggest oil producer, relies on crude sales for around 70 percent of national income, but its oil and gas infrastructure is in need of updating.

    The country's four refineries have never reached full production because of poor maintenance, causing it to rely on expensive imported fuel for 80 percent of energy needs.

    These problems have been exacerbated by a series of attacks on oil and gas facilities by militants in the southern Niger Delta energy hub which pushed production down to 30-year lows in the last few weeks.

    Oil minister Emmanuel Ibe Kachikwu, who also heads the Nigerian National Petroleum Corporation (NNPC), has been in China since Sunday for a roadshow aimed at raising investment.

    "Memorandum of understandings (MoUs) worth over $80 billion to be spent on investments in oil and gas infrastructure, pipelines, refineries, power, facility refurbishments and upstream have been signed with Chinese companies," said NNPC in a statement.

    NNPC added the China roadshow was "the first of many investor roadshows intended for the raising of funds" to support the country's oil and gas infrastructure development plans.

    Earlier this week, NNPC said oil production had in the last few days risen by around 300,000 barrels per day (bpd) to 1.9 million bpd, due to repairs and no attacks having been carried out since June 16.

    Goldman Sachs, in a report published on Wednesday, said a "normalization" in Nigerian oil production would put pressure on global oil prices and may mean prices will average less than $50 a barrel during the second half of 2016.
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    Sinopec subsidiaries inflated 2014 revenue, costs by $3.04 billion: government auditor

    Subsidiaries of China's second-largest energy company Sinopec inflated their 2014 revenue and costs by 20.2 billion yuan ($3.04 billion), according to a report published by China's auditing department.

    Twelve subsidiaries of Sinopec Group, the parent of Sinopec Corp, have manipulated their financial reports by creating fake invoices of fuel sales, among other discrepancies, the report from the China National Audit Office published on Wednesday said.

    The audit also showed Sinopec lost 1.29 billion yuan after it acquired a 49-percent stake in an overseas project, due to "insufficient assessment of risk factors," said the report, without identifying the project.

    Crude output from 29 overseas production projects fell short of targets stated in feasibility studies by about 90 million tonnes, the audit showed.

    Sinopec compared the audit to a health screening in a statement it released on Wednesday in response to the report.

    "Of the 31 problems reported in the audit, we've completed the rectifying of 28 and the remaining three is under way," the company said.

    Sinopec Group's listed vehicle Sinopec Corp reported it earned 2,825.9 billion yuan ($425 billion) in revenue and reported costs of about 2,566 billion yuan ($386.17 billion) in 2014.

    China's national audit department reviewed the financials of the 10 largest state-owned companies including Aluminium Corporation of China (CHALCO), Sinopec and China National Offshore Oil Corporation (CNOOC), exposing huge losses in these firms as a result of low efficiency and bad investment decisions.

    The auditing office also pointed to wasted investments Sinopec's subsidiaries made, such as 14 unused chemical plants, and raised red flags on two dozen "illegally acquired" fuel stations.

    The agency also said Sinopec added refining capacities faster than the market could absorb, leading to underutilization of facilities.

    By contrast, an audit carried out on CNOOC, a state-run offshore oil producer, found only minor problems such as slow progress in projects.

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    China gasoil demand hits near 6-year lows, gasoline reverses trend

    Apparent demand for oil in China, Asia's biggest oil consumer, headed lower in May as subdued economic activity pulled down gasoil consumption to its lowest level in nearly six years, while gasoline witnessed its first year-on-year decline in consumption since January 2014.

    Total apparent oil demand was 10.88 million b/d in May, down 2.7% year on year and 4.2% lower than April, according to S&P Global Platts calculations based on recently released official data. Analysts are of the view that the slowing pace of industrial activity will keep a lid on China's domestic demand growth over the next few months.

    While demand for gasoil and fuel oil, which has been on a downward trend for the past several months, maintained a similar pattern in May, gasoline demand also made a year-on-year retreat of 1.3%, after growing for 27 months at an average rate of 11.2%.

    The falls registered in fuel oil, gasoil and gasoline demand was enough to more than offset gains in demand for naphtha, LPG and jet fuel, pulling down overall demand numbers, Platts calculations showed.

    In May, China's real economic activity growth slowed, with value-added industrial production growing at 6% year on year, the same as in April, after posting a rise of 6.8% in March.

    "We believe real activity data for May suggests that China's economy is stable but lackluster," Standard Chartered Global Research said in a report.

    Fixed asset investment growth slowed to 9.6% in the year to date, from 10.5% a month earlier. Growth in fixed asset investment and industrial output are related to energy consumption. This meant investment growth slowed to 7.4% in May, from 10.1% in April, HSBC said in a report.

    "The slowdown in the manufacturing sector may continue," HSBC said. "Over the past few months, the pace of the slowdown has been sharper. Partly, this is due to continued capacity reduction in heavy industries."

    Over the first five months of the year, the country's cumulative apparent oil demand edged down 0.8% to 11.10 million b/d.


    Not surprisingly, the deceleration in key industrial activity and supply-side reforms weighed on gasoil demand, since it has a high correlation to industrial activity in China, as it is used to transport coal, steel and cement.

    Apparent demand for gasoil dropped 12.9% year on year to 3.14 million b/d in May, the lowest level since August 2010. It was also down 5.3% from April. Given gasoil stocks in April fell 5.44% month on month, actual demand for gasoil would be slightly higher than the implied figure, according to data compiled by state-owned news agency Xinhua.

    It attributed the stock decline to higher demand following a pick-up in agricultural activity.

    Refiners said that compared to gasoline, sales of gasoil were better in June as trading houses needed to replenish stocks.

    Fuel oil demand in May weakened by more than 17.2% year on year to 859,000 b/d, after declining 35.4% in April, which was the sharpest year-on-year decline since December 2013. But rose 27.8it represented a month-on-month increase of 27.8%.

    The year-on-year drop occurred as China's independent teapot refineries have increasingly switched to imported crude feedstock from fuel oil or bitumen blend. 

    Gasoline has been one of the major drivers of China's apparent oil demand growth in recent years and has supported overall oil demand over recent months, despite slowing consumption of industrial fuels. Reversing the trend in May, demand for gasoline, however, fell 1.3% year on year to 2.68 million b/d.

    At the same time, a stock build of 1.39% over May from end-April signaled that actual demand was even lower.

    "I still believe demand for the fuel will still grow at over 7% year on year in 2016, taking into account the consumption of blended gasoline," a Beijing-based trader from an oil major said, referring to gasoline.

    Some of the blended gasoline, which is not included in the official production data, contains up to 30% of imported mixed aromatics.

    Beijing does not release official data on oil demand and stocks. Platts calculates apparent demand for individual oil products by adding output, as reported by the National Bureau of Statistics, and net imports, as reported by the customs department.

    China imported 1.21 million mt of mixed aromatics in May, surging more than threefold year on year.

    It meant mixed aromatics inflows in May would add around 4 million mt, or 1.13 million b/d, of blended gasoline to supplies, in addition to production from refineries.

    Apparent demand for jet fuel rose 15.9% year on year to 788,000 b/d in May. Data from the Civil Aviation Administration of China showed overall aviation traffic continued to register growth. In April, total traffic turnover rose 12.6% year on year.

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    USGC sour crudes rise on reported Thunder Horse production outage

    The US Gulf Coast crude market saw regional sour grades strengthen Wednesday after reports of shuttered production at the BP-operated Thunder Horse platform in the US Gulf of Mexico.

    Crude production at Thunder Horse was halted following the explosion and fire Monday night at Enterprise Products Partners' Pascagoula, Mississippi, natural gas processing facility, Gulf Coast crude market sources said.

    BP has not yet responded to queries for confirmation about Thunder Horse.

    The shuttering of the Mississippi gas processing facility led to the shutting in of gas production at the Thunder Hawk platform on Tuesday, operator Murphy Oil said then.

    "Last time the gas line was shut in [at Thunder Hawk], the liquids production on Thunder Horse dried up as well," a trader said.

    According to Platts assessments Wednesday, Gulf Coast sour crude grades rose following speculation of the platform's outage.

    Regional benchmark Mars rose 15 cents to an assessment of WTI cash minus $3.35/b, and Thunder Horse gained 15 cents to be assessed at WTI cash minus $1.05/b, although no spot trades were heard for the offshore crude grade. In addition, the August/September spread on Mars widened out, with second-month values assessed 20 cents/b lower than front-month values indicating higher immediate demand from any loss of production in the Gulf of Mexico.
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    China’s May LNG imports climb YoY

    Liquefied natural gas imports into China, the world’s largest energy consumer, rose 27.3 percent in May as compared to the same month a year ago, according to the General Administration of Customs data.

    China imported 1.43 million mt of the chilled fuel in May, as compared to 1.12 million mt a year before, the data shows.

    The LNG import figures in May dropped 24.3 percent as compared to April when China’s imports of LNG totalled 1.89 million mt.

    According to the customs data, imports of piped natural gas increased 17 percent on year to 2 million mt.

    China is currently the world’s third largest importer of LNG. The country is expected to require large volumes of the chilled fuel over the next decade.

    At the end of 2015, there were 13 LNG terminals in operation in China, with a total capacity of 41.3 MTPA and an average annual utilization rate of around 50%, according to GIIGNL, the International Group of Liquefied Natural Gas Importers.

    Eight terminals were under construction for a combined capacity of around 24 MTPA at the time when GIIGNL released its 2015 report, the Group said.
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    RasGas signs new LNG deal with EDF to supply 2mn tonnes a year

    Ras Laffan Liquefied Natural Gas Company - 3 has entered into a new liquefied natural gas sales and purchase agreement (SPA) with French energy company, EDF under which RasGas will deliver up to 2mn tonnes a year to EDF’s new terminal in Dunkerque, France from 2017.
    The agreement was signed by RasGas chief executive officer Hamad Mubarak al-Muhannadi and Marc Benayoun, EDF group senior executive, vice president gas and CEO of Edison.  

    This agreement complements three existing long term SPAs between RasGas ventures and EDF group subsidiaries for delivery of up to 4.6mn tonnes per year to Edison in Italy and up 3.5mn tonnes per year to EDF Trading in Belgium.

    Al-Muhannadi said, “This latest agreement is an excellent example of RasGas’ continued commitment to developing and executing opportunities that respond to our customer’s needs. We are proud that, together with EDF, we have played a significant role in continuing to provide a safe and reliable supply of energy to the homes, businesses and communities of Europe.”

    Benayoun said, “This agreement with RasGas reflects EDF’s growing interest in the LNG markets.  The group is proud to add this significant contract to its global LNG portfolio and to reach a new important milestone in the excellent relationship with RasGas, who already delivers LNG cargoes to the group under long-term contracts in both Rovigo and Zeebrugge terminals.

    “At a time when Dunkerque LNG is due to receive its first commissioning cargo early July, this new contract demonstrates Dunkerque LNG’s outstanding position in the North West European gas markets.”
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    Saudi Arabia appears to end oil market share war, starts balancing

    Has Saudi Arabia already switched tack and started to surreptitiously balance supply and demand in the crude oil market?

    One of the persistent themes of crude oil markets since the price crashed in mid-2014 is that top exporter Saudi Arabia decided to stop its balancing role and instead chase market share, no matter the implication for prices.

    However, there are signs that the pursuit of market share by the kingdom is no longer a top priority, especially in their buyers in Asia.

    Figures from top Asian crude buyers China, India, Japan and South Korea suggest that Saudi Arabia is effectively conceding market share to rivals such as fellow Gulf producers Iran and Iraq, as well as an increasingly assertive Russia.

    While this may not exactly be a voluntary process, it does appear that Saudi Aramco, the kingdom's state oil company, isn't pulling out the stops to reverse the loss of market share.

    For the past four months Aramco has raised the official selling price (OSP) of its benchmark Arab Light grade to refiners in Asia, which take about two-thirds of the kingdom's exports.

    The OSP for July-loading cargoes was set at a premium of 60 cents a barrel to the regional Oman-Dubai crude benchmark, up from 25 cents in June and a significant reversal of the discount of $1 as recently as March.

    It's likely the case that Aramco is simply adjusting prices to reflect moves in the Oman-Dubai timespreads and also to reflect a stronger premium for global benchmark Brent over Dubai.

    But the mere fact that the OSP has returned to what could be considered more normal patterns indicates the Saudis may be stepping back from a market share at all costs policy.

    From October 2014 to May this year the OSP for Arab Light cargoes to Asia was at a discount to Oman-Dubai for all but three of those 20 months.

    This extended period of discounting coincided with the period where the Saudis appeared determined not to cede market share to rivals.

    The recent change back to premiums for the OSP perhaps indicates that the Saudis have taken the view that it's better to give a little ground to rivals in the expectation that the market is already balancing and prices can move sustainably higher.

    Certainly the import data from major Asian consumers seems to support this view.

    China's imports from Saudi Arabia in the first five months of the year rose 3.87 percent to 21.86 million tonnes, equivalent to about 1.05 million barrels per day (bpd).

    That doesn't sound too bad, but China's total imports are up 16.5 percent in the first five months of 2016 compared to the same period last year.

    Russia has also toppled Saudi Arabia as the top supplier to China, with imports rising 41.8 percent to 22.17 million tonnes, or about 1.06 million bpd, in the January-May period.


    India, Asia's second-largest crude importer, shows a similar pattern, but with Iran and Iraq as the producers grabbing higher shares.

    India imported 856,200 bpd from Saudi Arabia in the first five months of the year, up 9.4 percent from the same period in 2015, according to trade sources and ship-tracking data compiled by Thomson Reuters Oil Research and Forecasts.

    Again, a 9.4 percent gain doesn't sound too bad, but India's imports from Iran rose 64.5 percent to 334,100 bpd and those from Iraq jumped 55.2 percent to 892,300 bpd in the first five months of the year.

    Iraq has replaced Saudi Arabia as India's top supplier, meaning that the Saudis have lost their top spots to rivals in Asia's two biggest importers, surely a sign that pursuing market share is no longer the main game.

    Iran is also having considerable success in winning back market share lost while it was under Western sanctions over its nuclear program.

    It's a slightly better story for the Saudis in Japan, the number three importer in Asia, with imports rising 12.6 percent in the first five months of 2016 to the equivalent of about 1.25 million bpd.

    Iraq has seen a far bigger percentage gain, with Japan increasing purchases by 50.9 percent, but this was off a very small base and imports in the first five months were still a modest 71,800 bpd.

    Among Japan's major suppliers, the big loser is the United Arab Emirates, which has seen its imports drop by 5.4 percent, while fellow OPEC member Qatar has increased its oil exports to Japan by 22.8 percent.

    South Korea, the fourth-biggest Asian oil importer, has bought 6.7 percent less crude from Saudi Arabia in the first five months of this year compared to the same period in 2015, although the kingdom is still the biggest supplier.

    Iran has more than doubled its exports to South Korea in the January-May period and is now the third-biggest supplier behind Saudi Arabia and Kuwait.

    The pattern that is emerging so far in 2016 is that while the Saudis are selling more oil to their major buyers, with the exception of South Korea, their rivals are doing better at building market share.

    The Saudis have hinted that they may return to their traditional role of balancing the market once the global oil market recovers.

    "Despite the surplus in global oil production and lower prices, the focus of attention remains on countries such as Saudi Arabia which, due to its strategic importance, will be expected to balance supply and demand once market conditions recover," Energy Minister Khalid al-Falih was quoted as saying on June 22.

    The import data and the Saudi pricing moves suggest they have already started this process.
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    U.S. Natural Gas Futures Surge to 13-Month High on Warm Outlook

    U.S. natural gas futures rose to a 13-month high as temperatures were forecast to be above normal in the contiguous U.S.

    Readings may be broadly above normal from July 9 through July 13, with even hotter weather in the Southwest and from Texas to Indiana, according to MDA Weather Services. The high in Dallas July 9 may be 101 degrees Fahrenheit (38 Celsius), 5 more than average, data from AccuWeather Inc. show.

    “The forecast is expected to get some warmer weather here at the start of July,” said Gene McGillian, senior analyst and broker at Tradition Energy in Stamford, Conn. “So here we are basically back to where we haven’t been since last summer. I think it’s a little premature to say whether or not the market has topped out, however.”

    Gas has risen about 80 percent after reaching a 17-year low in March as summer heat boosted demand for the power plant-fuel, eroding a stockpile glut. An explosion at a gas plant in southern Mississippi that closed two offshore platforms, combined with flooding in West Virginia, may have also helped narrow the surplus.

    “Some of the drillers who have been off on the sideline might start coming back and start ratcheting up output to try to take advantage of the increase in price,” McGillian said. “Right now it looks like it’s full steam ahead.”

    Natural gas for August delivery rose 0.1 cent to $2.891 per million British thermal units at 9:34 a.m. on the New York Mercantile Exchange. Prices touched 2.974, the the highest intraday level since May 21, 2015.
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    Summary of Weekly Petroleum Data for the Week Ending June 24, 2016

    U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending June 24, 2016, 190,000 barrels per day more than the previous week’s average. Refineries operated at 93.0% of their operable capacity last week. Gasoline production decreased last week, averaging about 10.0 million barrels per day. Distillate fuel production increased last week, averaging over 5.0 million barrels per day.

    U.S. crude oil imports averaged about 7.6 million barrels per day last week, down by 884,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.8 million barrels per day, 12.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 904,000 barrels per day. Distillate fuel imports averaged 25,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.1 million barrels from the previous week. At 526.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 1.4 million barrels last week, and are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 1.8 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.5 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 1.0 million barrels last week.

    Total products supplied over the last four-week period averaged over 20.4 million barrels per day, up by 2.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.7 million barrels per day, up by 1.8% from the same period last year. Distillate fuel product supplied averaged over 3.8 million barrels per day over the last four weeks, down by 2.9% from the same period last year. Jet fuel product supplied is up 7.2% compared to the same four-week period last year.

    Cushing down 1.0 mln bbls

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    US oil production falls for another week

                                                 Last Week    Week Before    Last Year

    Domestic Production '000....... 8,622               8,677             9,595
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    Eclipse Resources Ramps Up Drilling; Floats More Stock to Raise $

    Yesterday Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA (but drilling mostly in Ohio) released a mid-year update on its drilling program.

    It’s good news, for a change! Earlier this year Eclipse said they would drill only one new well and that they were curtailing, or shutting in, production from some of their wells.

    This latest update changes that. Eclipse says given the expected higher price for natural gas as reflected by the forward market, they now intend to drill 10-12 new wells this year, and they’re turning the spigots back on for the curtailed wells.

    The Eclipse board has also voted to increase the capital expenditures budget by $28 million. No doubt that money will come from a new stock offering the company also announced yesterday–floating 37.5 million shares of stock, looking to raise $131 million…

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    South African State Company Offers to Buy Chevron Refinery

    South Africa’s state-owned Strategic Fuel Fund said it has expressed interest in buying Chevron Corp.’s stake in a Cape Town oil refinery and downstream assets in the country and in neighboring states.

    An offer has been made by the SFF for the 75 percent stake on offer, it said in a statement on Wednesday.

    The refinery has a capacity of 110,000 barrels-per-day.
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    Oil giant CNPC seals plan to restructure oilfield services

    China's top energy group China National Petroleum Corp (CNPC) has approved plans to restructure its oilfield services business, the company said on Wednesday.

    The move came one day after filings showed the company is ready to sell some of its largest oilfield subsidiaries which have reported declining revenues over the past few years.

    On June 28, Xinjiang Dushanzi Tianli High & New Tech Co. Ltd said it was in talks to buy CNPC's oilfield services assets, which may include China Petroleum Pipeline Bureau and China Petroleum Engineering and Construction Corp, according to a filing to the Shanghai stock exchange.

    Neither CNPC or Xinjiang Dushanzi gave further details regarding the restructure.

    CNPC's upstream business has been crippled by a decline in global crude prices, putting pressure on China's biggest oil producer to cut costs and spin off money-losing businesses.

    CNPC President Wang Yilin said the company would "make efforts to streamline the oilfield services business and improve its efficiency".

    CNPC's listed unit PetroChina also sold off its pipeline assets earlier this year.

    Beijing has been seeking to gradually open up its massive energy sector to private investors.

    State companies such as CNPC and Sinopec have been a breeding ground for corruption and have been criticised for their monopoly in the oil and gas market.

    Despite calls for state-owned enterprises to improve efficiency, many industry insiders and experts say the sprawling oil sector will opt only for incremental changes rather than for a radical shake-up.
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    Iraq's oil exports set to decline in June for second month

    Iraq's oil exports are set to decline in June for a second month, according to loading data and an industry source, adding to signs that supply growth from OPEC's second-largest producer is slowing this year.

    Iraq in 2015 provided the biggest rise in supply from the Organization of the Petroleum Exporting Countries. But companies working in Iraq have warned the government that projects to boost output will be delayed if Baghdad cuts spending in response to low oil prices.

    Iraq's southern exports in the first 29 days of June have averaged 3.14 million barrels per day (bpd), according to loading data tracked by Reuters and an industry source. That would be down 60,000 bpd from May and sharply lower than the 3.47 million bpd initially expected this month.

    "At some point, we are going to see the growth curve flatten out, but it is too early to say if this is happening now," said Samuel Ciszuk, principal oil market adviser at the Swedish Energy Agency.

    "There might be several issues affecting Iraqi exports - technical constraints, slower production growth and possibly some competition in the market from Iran."

    The head of Iraq's state-owned South Oil Company, speaking to Reuters on Sunday, gave similar exports figures and said the decline was due to maintenance work and as higher domestic demand limits the volume available for export.

    Iraqi officials could not immediately be reached for further comment on Wednesday.

    The south pumps most of Iraq's oil. Iraq also exports smaller amounts of crude from the north by pipeline to Turkey.

    Northern shipments of crude from fields in the semi-autonomous Kurdistan region have fallen to 480,000 bpd so far in June, according to loading data, from 510,000 bpd in May.

    The shipments were running at 600,000 bpd at the start of the year but have slowed due to pipeline sabotage and a decision by the central government in Baghdad to suspend pumping Kirkuk crude into the line.

    Iraq last year boosted production by more than 500,000 bpd, surprising industry observers, despite spending cuts by companies working at the southern fields and conflict with Islamic State militants.

    Iraqi officials still expect further growth in the country's exports this year, but at a slower rate than 2015.

    This year, Iran has provided OPEC's largest supply boost as it recovers from Western sanctions that were lifted in January.

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    Statoil to keep fields operating even if Norway oil workers strike

    Statoil will initially keep oil fields operating even if negotiations set for June 30 to July 1 fail to avert a strike that would halt output at others, the Norwegian Oil and Gas Association (NOG) said on Wednesday.

    Workers at five fields operated by ExxonMobil, Engie and BASF unit Wintershall could walk off the job from July 2 if wage talks fail.

    That would cut Norway's output of oil, natural gas and natural gas liquids (NGL) by about seven percent, data from Norway's Petroleum Directorate shows.

    Trade unions said on Monday 755 workers could walk out, potentially affecting work on seven fields that account for about 17 percent of Norway's crude oil and natural gas output.

    NOG on Wednesday said eight fields in total would be affected, but output would only be affected at five of them.

    It cautioned that the three Statoil fields could be forced to also halt output if any strike that occurs is expanded.

    A final round of mandatory talks will be hosted by a state mediator on June 30 and July 1.
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    Egypt's launches tender for third floating re-gasification unit

    Egypt has launched a tender to hire a third floating and storage regasification unit (FSRU) to import liquefied natural gas (LNG), an official from state-run energy firm EGAS told Reuters.

    Egypt, a former energy exporter but now net importer due to falling production and rising consumption, began LNG imports last year to help avert blackouts on its overworked power grid.

    The official said the tender was launched on Tuesday seeking an FSRU with a capacity of 750 million cubic feet per day and would close in two weeks.

    Egypt's gas shortfall has led to rationing among energy-intensive industries such as steel mills and fertiliser plants and caused some output disruption last year.

    Egypt took delivery of its first FSRU from Norway's Hoegh in April 2015 and a second from Singapore-based Norwegian firm BW Gas last September.
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    Sale Under Way on Well Stimulation Company’s Assets: Daily Rant!

    Tiger Liquidity Services Energy Partners (TLSEP), in cooperation with Century Services Corp., has been retained by court appointed receiver KPMG to sell late-model, low-hour pressure pump and fracking fleet assets formerly owned by Millennium Stimulation Services.

    The sale is the latest project for the partnership betweenTiger Capital Group and Liquidity Services (NASDAQ: LQDT), which was formed in January 2016 to help insolvency and turnaround professionals ramp up their services to the turbulent oil and gas market, and to directly assist companies seeking to sell surplus assets.

    Assets currently available for sale from Medicine Hat-based Millennium – which provided pressure pumping, well stimulation and hydraulic fracturing services – include a well stimulation and coil tubing fleet consisting of more than 100 units, including a 2014 NOV HydraRig masted coil tubing unit, pumper, blender and hydration trailers, chemical vans, and sand delivery units. The pressure pumping fleet includes six quintiplex fracturing pump trailers: four 2013 Charlton & Hill MFP-1701 units, and two from 2014 manufactured by Stewart & Stevenson.

    Rolling stock offered includes more than 20 Kenworth T800 T/A truck tractors – none older than 2013, with some as new as 2015 – and 2014 Kenworth T800 Tri/A Crane Trucks. An assortment of four-wheel drive crew cab pickup trucks includes five 2014 Dodge Ram 3500 Laramies, two 2014 Dodge Ram 1500 Laramies, two 2014 Dodge Ram 3500 SLT LWBs, and a 2014 Dodge Ram 2500 Laramie mega cab. A Manitou MH25-4T K-Series 5,500-lb capacity diesel forklift is also available.

    “This asset sale represents a unique opportunity for pressure pumping, well stimulation or hydraulic fracturing equipment rental companies or servicing companies to acquire top-of-the-line equipment in exceptional condition at attractive prices,” said Dan Beck, vice president of global sales for Liquidity Services. “These assets are ready to be placed into operation at any site in North America or internationally.”

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    Gunvor Said to Plan U.S. Office as Oil Trader Sheds Russian Ties

    Gunvor Group Ltd. plans to open a U.S. office as the oil trader moves away from its Russian roots, according to people with knowledge of the matter.

    Gunvor is looking for more staff after hiring at least one senior energy trader for the planned Houston office, two of the people said, asking not to be identified because the matter is private. The company is considering opening an office with 20 to 30 people before the end of the year, trading petroleum products and possibly crude, one person said.

    The plans to establish the U.S. office come after the company severed links to Gennady Timchenko, the Russian oligarch who co-founded Gunvor with Swedish national Torbjorn Tornqvist more than a decade ago. Timchenko struck a deal to sell his 44 percent stake in the trading house to CEO Tornqvist in March 2014, the day before the U.S. imposed sanctions on the Russian for his ties to Vladimir Putin.

    A Gunvor spokesman wasn’t immediately available for comment on the plans for a U.S. office. The company has previously denied it has ever had links to Putin.

    Asset Sales

    Gunvor, one of the world’s five largest independent oil traders, would join rivals such as Vitol Group and Trafigura Group with a Houston presence. The company reported record profit of $1.25 billion in 2015.

    Over the last year, Gunvor has sold the bulk of its Russian assets, including its majority stake in the Ust-Luga oil-products terminal, according to company statements. Russian crude and oil products account now account for 12 percent of Gunvor’s trading activity. The company has said 40 percent of the crude it handles originates from North and South America, including the U.S.

    Gunvor, which has its main trading operations in Geneva, hired gasoline trader James Hutchinson from Valero Energy to join the new office, two of the people said. Hutchinson was formerly a trader at Trafigura.

    Founded 16 years ago by Timchenko and Tornqvist, a former BP trader, Gunvor got its start trading Russian crude oil. At one point it handled about a third of Russian seaborne crude exports, according to the company.

    Based in Cyprus, with major trading offices in Geneva and Singapore and smaller trading arms in Shanghai, Nassau and Dubai, the company has reduced its dependence on Russian oil in recent years. In 2015, Gunvor said it handled about 2.5 million barrels of crude and petroleum products a day.

    Between 2009 and 2011, the company operated a small Houston office that came with its acquisition of trading house Castor. Gunvor later relocated its Houston-based traders to the Bahamas.

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    Exxon Said to Eye Gas Deal That May Ease Mozambique Debt Crisis

    Exxon Mobil Corp. is considering buying stakes in natural gas discoveries off Mozambique made by Anadarko Petroleum Corp. and Eni SpA, potentially giving a tax windfall to the African nation grappling with a deepening debt crisis, according to two people with knowledge of the matter.

    Acquiring a share of Anadarko’s Area 1 in the Rovuma Basin off Mozambique’s north coast could generate capital gains tax of about $1.3 billion for the government, one of the people said, asking not to be identified because the matter isn’t public. Exxon, the world’s largest oil and gas company, is also interested in Eni’s Area 4, the people said. Three years ago, China National Petroleum Corp. purchased 20 percent of Area 4 for $4.2 billion.

    Should Exxon decide to invest in potentially one of the world’s largest liquefied natural gas projects, the tax revenues generated would ease the southern African country’s looming credit crunch. Mozambique is struggling to balance its books after $1.4 billion of hidden debt was disclosed in April, prompting the World Bank and other donors to suspend aid.

    “We don’t comment on rumors or speculation,” Lauren Kerr, a spokeswoman for Exxon, said in an e-mail. Anadarko and Eni declined to comment.

    Eni CEO Claudio Descalzi said last month that the company is in talks on selling a stake in its Mozambique discovery and expects to reach a final investment decision on an LNG project this year.

    Exxon is already focused on Mozambique after winning three exploration licenses in October for offshore blocks to the south of the Anadarko and Eni discoveries. The company also has a working interest in Statoil’s Block 2 in Tanzania, north of the Rovuma Basin.

    Mozambique’s Minister of Natural Resources and Energy Pedro Couto declined to comment on whether Exxon was interested in taking a stake in the Anadarko and Eni discoveries.

    While the vast gas discoveries have the potential to more than triple Mozambique’s economic growth by 2021, in the short term the nation’s debt is at a high risk of distress, according to the International Monetary Fund. Government bond yields jumped to a record 18.94 percent last week and the IMF wants an international and independent audit of state-owned entities whose debt Mozambique failed to disclose to investors when arranging to convert another corporate loan into sovereign credit.

    Anadarko and Eni in December agreed on a plan to develop adjoining areas in the Rovuma basin, targeting a combined 24 trillion cubic feet of gas.

    While Anadarko has yet to make a final investment decision on its $15 billion LNG project in Mozambique, this month it appointed John Bretz as interim country manager after his predecessor retired.
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    Snam to list Italgas unit to help Europe push

    Snam, Europe's biggest gas pipeline operator, will spin off and list its 5.7 billion euro ($6.3 billion) domestic distribution unit as it sets its sights on growth in European gas transport to help boost shareholder returns.

    Snam, which makes more than half of its revenues from gas transmission, is looking to play a leading role in integrating Europe's grids and making Italy a European gas hub.

    Snam, controlled by state lender Cassa Depositi e Prestiti (CDP), will list 86.5 percent of Italgas by the end of the year by distributing Italgas shares to its own investors in a deal that will cut its net debt by 1.5 billion euros to an expected 3.7 billion euros by the end of 2016.

    While it will raise no money from the listing, its lightened debt and sharper focus will give it more room to access funding.

    "It will have about 1 billion euros for acquisitions now and in a few years could even sell its residual Italgas stake," said Oliver Salvesen of Jefferies.

    The company, which has a strategic alliance with Belgium's Fluxys, already controls French grid TIGF and Austrian pipeline TAG and recently bought a 20 percent stake in the Trans Adriatic Pipeline that will bring Azeri gas into Europe.

    It is interested in Austria's Gas Connect Austria as well as a stake in Greece's DESFA.

    In a call on the group's 2016-2020 plan, CEO Marco Alvera said the 13.5 percent stake Snam would keep in Italgas was strategic.

    "But we're not committed to holding on to it forever," he added.

    Alvera declined to put a value on Italgas but said such companies normally commanded a premium to their regulated asset base (RAB), possibly in the region of 18-20 percent.

    Italgas, Italy's biggest gas distributor, had a RAB of 5.7 billion euros at the end of 2015 which will grow to more than 7 billion euros as it buys new concessions.

    Under new rules Italy's fragmented gas distribution sector is set to enter a period of consolidation, favouring companies with strong balance sheets.

    In January sources told Reuters CDP was considering a merger of Italgas with nearest rival 2i Rete Gas to create a group with joint assets of more than 8 billion euros.

    "While Italgas will be a major player in the consolidation of the distribution sector in Italy, Snam will focus on its strong growth potential, leveraging its leadership in the European market," Alverà said.

    Snam, controlled by CDP through a vehicle that also includes State Grid Corporation of China, has earmarked 4.3 billion euros in transport and storage businesses in Italy and abroad to 2020.

    Dividends will remain stable this year, if adjusted to include the dividend from Italgas, but will grow 2.5 percent a year in the following two years.

    Snam will also spend up to 500 million euros in buying back shares.

    "The main surprise is the share buyback which in our view could limit the possible cannibalisation between Italgas and Snam shares later this year," Credit Suisse said.
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    Energy Transfer Terminates $33 Billion Merger With Williams

    Energy Transfer Equity LP terminated its merger agreement with Williams Cos. after a court ruled that it can walk away from the deal.

    “Consistent with its rights and obligations under the merger agreement, ETE subsequently provided written notice terminating the merger agreement due to failure of conditions under the merger agreement,” Energy Transfer said in a statement Wednesday.

    Eighteen months after Energy Transfer began talks to acquire the rival pipeline giant, a Delaware judge ruled on Friday that the company can back out of the nearly $33 billion deal. The company’s counsel, Latham & Watkins LLP, has advised Energy Transfer it was unable to deliver a required tax opinion by June 28, the date specified in the merger agreement.

    Delaware Chancery Court Judge Sam Glasscock ruled June 24 that Energy Transfer is entitled to terminate the merger after its advisers said the deal didn’t free investors from tax liabilities. Williams remains committed to completing the merger and will “enforce its rights” under the terms of its agreement if Energy Transfer attempts to terminate the pact, the company said in a separate statement after the decision. Williams’s shareholders voted on Monday to approve the takeover and filed a notice of appeal.

    The proposed tie-up, hailed by Energy Transfer Chief Executive Officer Kelcy Warren before the price of oil fell by almost half, now stands as one of the largest deals undone by the plunge in prices that has sent shock waves through companies, industries and entire economies.

    The merger soured on multiple fronts after it was first announced in September. The collapse in crude prices dragged the market value of both companies down by more than a third, straining the relationship between the two and throwing into question the economics of their deal. The deal began to break down almost from the start as oil sank lower than either expected, undoing the economic logic of the takeover and prompting both companies to accuse each other of sabotaging the deal.
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    Angola LNG drops supply tender

    The Chevron-led $10 billion Angola LNG project has cancelled an international supply tender just weeks after the plant in Soyo loaded its first post-shutdown cargo.

    The 5.2 million tons per year LNG plant was closed in April 2014 after a major rupture on a flare line.

    “I can confirm that we have cancelled the next tender with the objective of rescheduling it to align it with our operations. We expect to reissue the tender shortly,” an Angola LNG spokeswoman told LNG World News on Tuesday.

    To remind, Angola LNG said the first cargo after shutdown was loaded at Soyo in early June, adding that the facility is expected to load further LNG and LPG cargoes as part of the commissioning and testing process.

    The first cargo was reportedly bought by Geneva-headquartered trader Vitol trough a tender launched by Angola LNG.

    Angola LNG said earlier this month that further cargoes will be sold globally in a variety of ways, including international sales tenders.

    Angola LNG is a joint venture between Sonangol (22.8%), Chevron (36.4%), BP (13.6%), Eni (13.6%), and Total (13.6%)
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    BP Will Send First LNG Cargo Through Wider Panama Canal in July

    BP Plc will send the first tanker of liquefied natural gas through the expanded Panama Canal in late July, opening up a new trade route for the heating and power-plant fuel as supplies surge.

    The British Merchant will begin its journey in Trinidad & Tobago before heading to the canal for passage to the Pacific Ocean, according to an e-mailed statement from the Panama Canal Authority on Tuesday. The tanker, which has a capacity of 138,517 cubic meters of gas, is already anchored in the Caribbean, shipping data compiled by Bloomberg show.

    The $5.3 billion expansion will allow the waterway to handle the kind of massive tankers that transport LNG for the first time. The shorter trade route between the Atlantic and Pacific will help cut costs after global LNG prices plunged in the past two years because of lower oil prices, rising supply and softening demand. The U.S. became an exporter of LNG produced from shale gas in February with the start of Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana.

    “It’s what a lot of folks have been anticipating for a long time,” said Rusty Braziel, president of RBN Energy LLC in Houston. Given current oil prices and economic conditions, shipments through the canal may be limited to volumes contracted to go to Japan and other Asia-Pacific buyers. The longer-term prospects are more promising, he said.

    Earlier this month, the Panama Canal Authority estimated that 20 million tons of LNG may pass through annually, which would be equivalent to about 300 ships a year.

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    Russian Oil Industry Will Keep Stable Spending Plans, Fitch Says

    Russian oil and gas companies will maintain stable capital spending in the next few years, while the global industry cuts back, thanks in part to advantages provided by the country’s currency, according to Fitch Ratings.

    The cumulative capital expenditure in ruble terms of Russian oil companies rated by Fitch increased by 13 percent on an annual basis last year and will remain stable this year before falling by mid-single-digit percentages in 2017 and 2018, the credit-ratings company said in a statement Tuesday. They can manage this because “ruble flexibility” provides “a buffer against low oil prices,” it said.

    While most international oil companies are curbing spending to withstand the slump in crude prices, Russian producers have been able to avoid cuts in ruble terms because of their currency’s depreciation against the dollar. Rosneft PJSC, Russia’s biggest oil producer, said on June 8 its capital expenditure rose 20 percent in the first quarter compared to a year ago.

    A recent recovery in the exchange rate has producers monitoringcurrency markets closely. A downgrade to Russia’s credit rating or tax increases for producers are also potential threats to the companies’ plans, Fitch said. After an increase last year, taxes are likely to stay elevated for the next two years, it said.

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    China Gas Targets 20% Sales Growth as Lower Prices Boost Demand

    China Gas Holdings Ltd. expects natural gas sales to grow 20 percent in the current fiscal year as lower prices and the country’s push to replace coal with cleaner fuels spur consumption.

    The fuel distributor, which runs most city gas projects in China, plans to sell 12 billion cubic meters of natural gas in the year ending March, up from 10 billion cubic meters in the previous period, executive Chairman Liu Minghui said in a briefing in Hong Kong Tuesday. Chinese authorities in November reduced prices for the fuel in an effort to encourage usage.

    “China’s gas demand is always there, but relatively high prices last year made it unaffordable for many industrial users,” Liu said. “Because of the price cuts in November, consumption is back and we are confident we can achieve the 20 percent sales growth in the year ahead.”

    China’s gas consumption growth slowed to 3 percent last year as the fuel’s competitive edge was undermined by cheap oil and while government price cuts lagged a decline in the fuel’s value on the open market, according to Bloomberg Intelligence. The reductions in November have helped push the country’s average gas demand in the first five-months of this year 15 percent higher, according to BI calculations.

    China Gas also aims to expand liquefied petroleum gas sales to 3.8 million tons in the year ending March, from 3.2 million tons, and liquefied natural gas sales to 800,000 tons from 300,000 tons. The company’s sales growth in the April-to-June period was “better than the national average,” Liu said.

    The company’s annual profit dropped 32.6 percent to 2.27 billion yuan, after posting a 1.4 billion yuan impairment charge caused mostly by foreign exchange losses, according to a statement filed with the Hong Kong stock exchange. China Gas lowered its U.S. dollar debt to 7 percent by March 31 from as high as 83 percent two years ago to avoid future currency risks, Vice President Zhu Weiwei said at the briefing.
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    Fire at Mississippi gas plant halts U.S. Gulf Coast platforms

    At least two offshore oil platforms halted operations on Tuesday in the U.S. Gulf of Mexico after a fire at a natural gas processing plant in Mississippi shut a crucial pipeline that brings output onshore, several companies said.

    The fire at Enterprise Products Partners plant in Pascagoula was brought under control, but officials were still forced to close the 225-mile Destin gas pipeline system that can carry 1.2 billion cubic feet per day from offshore fields to Pascagoula.

    Destin, majority-owned by BP with Enbridge Inc a minority partner, said it was declaring force majeure, a legal clause that allows it to scrap commitments, as a result of the fire.

    Offshore company LLOG said it was in the process of shutting its Delta House floating production system in the Gulf of Mexico on Tuesday, a spokesman said.

    Murphy Oil Corp said its Thunder Hawk platform was shut in after the fire.

    Murphy added it plans to flow natural gas to an alternate processing facility and expects minimal disruptions to its operations.

    Several social media messages from Pascagoula residents had said the blaze erupted shortly before midnight at Chevron Corp's 330,000 barrels per day refinery in Pascagoula. The Pascagoula Police Department said the fire was not at the Chevron refinery.

    There were no injuries from the blaze, Enterprise said. The cause was under investigation. Enterprise took ownership of the plant from BP Plc on June 1.
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    The Permian: Uber oil resource in Texas.

    Image titleIn early 2013 the USGS put out this map of the shales, at that time the Bakken was the only big commercial shale.
    Image titleThis map, from the same time, shows land rigs crisscrossing the US hunting down the shales, at that time we had no idea which shales were significant, commercial or the scale of the technological impact. 

    Image titleToday, the EIA closely tracks activity in these counties, and we have the Marcellus/Utica which have changed the economics of natural gas (resource the size of Russia, economics make decent returns at $3.) We have the Eagle Ford, which is commercial,but not much larger than the Bakken, and then we have the Permian. In area the Permian is 75000 sq miles or 48m acres.  Under this area there are 13 shale horizons, today at $50, there is active drilling on 3. 

    Parsley Energy, an independent with 120000 acres claims 2bn resource barrels on their current drilling methodologies. Thats 16bn boee per million acres. Now Parsley is only including 2 of the shale horizons in this calculation, though management is indicating another 4 horizons have commercial potential. So Oil in the rock under Parsley's land could conceivably yield 4bn boee. If we include all 13 horizons for the calculation of Oil resource in place, and potentially recoverable, that directly leads us to a figure that looks like 8bn boee, or 64bn boee potential per million acres. 

    Parsley numbers are not dissimilar to other Permian players. 
    Image titleEOG, for example, claims 2.3bn boee on 3 horizons. EOG does not disclose acreage particularly well, we can estimate numbers at something like 13-14 boee per million acres, that is in line with Parsley.

    CEO did said this:

    The third implication is we can return to triple-digit direct rates of return with oil as low as $60 per barrel. And if history is any indication, we will continue to push the oil price needed for triple-digit returns even lower.

    EOG uses after tax cash flow return on capital at risk as its core measure of profitability. 

    Look, we could go on for pages like this. We have multiple Permian operators giving us approximately the same story. Image title
    Here's Oxy's famous slide, which covers 2.3m acres of land all over the Permian. At $80 oil all 8700 locations are commercial, and that implies some 7.6bn boee of resource, or 3.3bn boee per 1m acres. Oxy's acreage, being legacy, and all over the map, is 'average', unlike EOG, Parsley or others, they have not cherry picked the best acreage.

    We can therefore roughly estimate the following:
    At >$80 Oil: Permian resource: 159bn boee commercial recoverable. (or approx Canada)
    At $80 Oil: Permian resource: 95bn boee commercial recoverable. (Iraq?)
    At $70 Oil: Permian resource:  76bn boee (3x China)
    At $60 Oil: 63bn boee. (50% of Russia)
    At $50 Oil: 21bn boee (Brazil)
    At $40 Oil: 6bn boee. (No serious countries we know in conventional are commercial down at $40.)

    Further, on Oxy's estimates 29bn boee has been moved into the commercial zone (<$60) over the past year. 

    The Permian is in Texas, it has excellent property rights, plenty of quoted equity, some excellent management teams with a history of strong value creation, best of all it is the centre of a technology hurricane which continues to drive capex per boee developed down at a decent clip. 
    Image title

    We'll take Oxy's numbers again because they have AVERAGE acreage. In an environment where we have a rising Oil price across falling development costs in the Permian, I think I am going to make much money owning these stocks. 

    Every time I look I go buy more. 

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    Southwestern Energy Buys More Time with Banks, Debtholders

    It seems running an E&P (exploration and production) company these days is an exercise in debt management. How you keep the company out of bankruptcy court.

    The latest effort in that regard comes from Southwestern Energy, a major Marcellus/Utica driller. Yesterday Southwestern announced it has cut deals with its bankers and debtholders to push out the due date on its loans/IOUs another two years beyond the existing due date.

    That buys the company more time to, well, more time to figure out what else to do: wait for natgas prices to go up; fire more people to reduce overhead; pull a rabbit out of the hat; whatever.
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    Supreme Court to hear Venezuela oil rig dispute

    The U.S. Supreme Court on Tuesday agreed to weigh Venezuela’s bid to block a lawsuit filed by an American oil drilling company that claims the South American country illegally seized 11 drilling rigs six years ago.

    The high court will review a May 2015 ruling by the U.S. Court of Appeals for the District of Columbia Circuit that allowed one of the claims made by Oklahoma-based Helmerich & Payne International Drilling Company to move forward.
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    Study Showing Oil Sands Floats Seen Easing Pipeline Spill Worry

    The debate over what happens to oil-sands crude in a freshwater spill just got a new twist -- one that could help unlock stalled pipelines.

    A study funded by the Canadian government shows diluted bitumen doesn’t sink as readily as conventional oil when spilled in fresh water, upending previous assumptions. Instead, it floats, unless exposed to high temperatures and weathering.

    The results may help dispel some concern that a spill of diluted bitumen would be more difficult to clean up and help companies make the case for pipeline projects such as Kinder Morgan Inc.’s Trans Mountain expansion. Investors are watching closely, said Andrew Logan, director of the oil and gas program at Ceres, an investor network promoting sustainable business practices.

    “This kind of study is important because there is a battle among crudes" to supply the market, said Logan. Ceres represents investors with $14 trillion worth of assets. More understanding of how to mitigate the risks of heavy oil in a spill would help make the crude more accepted, he added.

    Facing Opposition

    The Canadian government is preparing a decision on Trans Mountain, which crosses rivers in British Columbia on its route to the Pacific. The province has opposed that pipeline and Enbridge Inc.’s Northern Gateway because of inadequate spill preparation. The risks of spills also featured in the debate -- and ultimate failure -- of TransCanada Corp. to win approval for its Keystone XL line.

    The study was funded by the Canadian government, while the oil industry provided the products to be tested and had no input in the design or interpretation of the research, said Heather Dettman, a researcher at Natural Resources Canada’s laboratorynear Edmonton who led the study. The results were presented at an environmental contamination conference in Halifax earlier this month.

    The study follows a 2015 report by the U.S. National Academy of Science that showed dilbit tended to quickly sink after being spilled in fresh water, requiring the use of dredgers or divers with vacuums to extract the oil from the sediment at the bottom of rivers.

    “The question is always does dilbit float or sink,” said Dettman said. “What we found is that the oil was floating but we also found that the lighter oils mixed in with the water, like adding cream to coffee.” Clean-up crews would still have a narrow window to recover the spilled fuel before it causes damage.

    Higher temperatures, which reached 29 degrees Celsius (84 Fahrenheit) during Enbridge’s 2010 spill on the Kalamazoo River in Michigan, accelerate the dispersal of heavy oil in water, according to the study. Cooler temperatures would allow more time to clean up a spill before the oil eventually settles on river bottoms.

    Enbridge’s emergency response systems focus efforts on surface collection and absorption in the early stages of an event to help collect floating bitumen, said spokesman Graham White.
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    Sinopec refutes rumour of 'super gasoline'

    Sinopec, the largest oil refiner in China, on Sunday denied it had succeeded in developing "super gasoline", rumoured to be able to reduce fuel consumption by 30 percent, Beijing Youth Daily reports.

    In a post on its official Weibo account, the company said: "Encouraging and giving respect to innovation is part of major Sinopec values, and it encourages employees to carry out technological innovations so as to give full play to their creativity.

    "Zhou Xiangjin is an employee engaged in synthetic fiber-related work at the company and, with regard to his claim of having invented a new gasoline product and technology, it deems there exists a lack of factual evidence."

    Through its mature and standard news release channels, the company's media team would inform the public on major technological breakthroughs in a timely manner, it was added.

    Previously, media reports had it that Zhou, who was in charge of Sinopec's chemical division, revealed the invention of a brand new gasoline product that was "clean, highly efficient, energy-saving and environmentally friendly".

    According to reports, the new product was easy to make and was less harmful to the environment. It did not freeze in winter, nor contain any aromatics or need any antiknock agents, and was less toxic.
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    Aramco, Sabic One Step Closer to Turn Oil Into Chemicals

    Saudi Arabian Oil Co. and Saudi Basic Industries Corp. are one step closer to building their first plant to process crude directly into chemicals, cutting out a link in the production chain from hydrocarbons to the finished products that go into plastics and other consumer goods.

    The state-owned companies signed an agreement Tuesday to study such a project to be located in Saudi Arabia, they said in a statement. A joint venture is possible if the companies decide to move ahead after the study is completed by early 2017, they said. Oil companies normally refine crude into transportation fuels including gasoline and diesel and leave byproducts such as naphtha to be processed separately into chemicals.

    The companies could “substantially” increase Saudi Arabia’s production of petrochemicals, while enabling them to boost commodity exports and spur industrial diversification, Amin Nasser, chief executive officer of the oil producer known as Saudi Aramco, said in the statement. It could also add more chemical products to the domestic market, he said at the signing ceremony.

    Saudi Arabia, the world’s largest oil exporter, is pursuing a plan to modernize its economy by expanding industry and reducing the kingdom’s reliance on crude sales for government revenue. Part of that plan involves using oil-based chemicals to produce materials like plastics that can go into consumer products and form the basis for a larger manufacturing industry in the country.

    Saudi Aramco would also be partly listed on the nation’s stock exchange under the plan outlined by Deputy Crown Prince Mohammed Bin Salman, the king’s son. The prince’s strategy calls for both Aramco and Sabic to be owned by the state’s Public Investment Fund, which currently holds 70 percent of the chemical company’s stock, according to date compiled by Bloomberg. The government owns Saudi Aramco directly.

    Saudi Aramco and Sabic, the third-biggest petrochemical maker in the world by sales, are planning to build the refinery in Yanbu on the Red Sea coast, two people with knowledge of the plans said in April, asking not to be identified because the project was confidential. Saudi Aramco and Sabic had been working separately on projects to produce chemicals straight from oil without the need to operate separate facilities, the people said. Former Saudi Arabia Oil Minister Ali al-Naimi had announced in 2013 that the ministry was working with Sabic for the construction of an oil-to-chemical refinery in Yanbu.
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    French Oil Refining Strike Fills Europe Trading Hub With Crude

    Europe’s oil-trading hub is fast filling up with what may be record amounts of crude and strikes in nearby France are to blame.

    Crude inventories in an area known by oil traders as ARA -- Amsterdam, Rotterdam and Antwerp -- jumped by more than 3.5 million barrels to 65.635 million barrels in the week ended June 17, according to data from Genscape Inc. That’s the most since the company began monitoring in 2013 and the supplies occupied 73 percent of available space. Stockpiles of oil in all of the Netherlands and Belgium haven’t exceeded 65 million barrels for at least 11 years, International Energy Agency data compiled by Bloomberg show.

    While there’s growing consensus among oil traders and analysts that a global crude glut is starting to erode, the buildup shows how vulnerable the market remains when local demand disruptions arise. French industrial action knocked out as much as 900,000 barrels a day of the country’s refining at one stage in June, about equal to the entire daily shipments of crudes that make up Dated Brent, a global benchmark.

    “There was a lot of capacity that was offline and tankers could not discharge” at a key port in northern France, said Olivier Jakob, an analyst at Petromatrix GmbH in Zug, Switzerland. “There may have been some redirection of tankers going for storage in ARA.”

    Eighty-four of the ARA hub’s 153 crude storage tanks at independent sites are now more than 75 percent full, while 55 are between 15 percent and 75 percent full, Genscape’s data show. There are zero empty tanks and only a few are even close to empty, according to Paulo Nery, London-based senior director for oil and shipping of Genscape. Traders also reserve space, meaning that the amount available is probably even lower than Genscape’s figures suggest.

    “There are literally only four near-empty tanks at somewhere between 10 percent and 15 percent. In January there were 18 tanks at less than 15 percent,” Nery said. “It’s pretty empirical” proof that inventories are filling.

    At least three crude tankers with 5 million barrels of cargo-carrying capacity had to divert north from Le Havre on France’s northern coast in May and June amid industrial action at the port and refineries that are mostly close to the coast. Two of the vessels went to Rotterdam.

    The strike will have cut France’s average refining output by 150,000 barrels per day in May and 300,000 barrels per day this month, the International Energy Agency said in a report June 14. At the height of the action, at least four of the country’s eight plants were halted and a fifth ran at reduced capacity in late May and early June, curbing as much as 900,000 barrels a day at one point. That’s about the same as average loadings of Brent, Forties, Oseberg and Ekofisk last year, according data compiled by Bloomberg.

    Impact from the French strike isn’t just being felt in crude storage. Demand for cargoes of newly pumped crude is weakening, a situation that is apparent in the price structure of derivatives linked to North Sea oil. A handful of cargoes have taken longer than normal to sell in the North Sea. Total SA, one of the companies affected by the French industrial action, took delivery of a cargo of Forties crude onto a supertanker called Maran Thetis in April and was still trying to sell it as recently as last week.

    The buildup of stored oil may not last long since the strikers have agreed to restart the plants. Refining rates have dropped in Europe in recent months, primarily because of the industrial action, prompting a large drop in inventories of diesel, according to Ehsan Ul-Haq, senior oil market analyst at KBC Energy Economics. That may have created an opportunity for refiners to build up crude stocks so they can process more of the barrels and replace the missing diesel, he said.

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    Traders to fill Asia oil storage in Q3 as maintenance crimps demand

    Oil traders plan to fill storage tanks and ships with crude in the third quarter to ride out a low demand season in Asia, hoping to cash out in the fourth quarter when prices rise, shipping and trading sources said on Tuesday.

    At least two trading houses have chartered supertankers to store crude off Singapore, taking advantage of lower freight rates and spot crude prices. More oil is expected to head into regional tanks ahead of the September to November refinery maintenance season.

    "Traders are trying to bottom-fish (for crude bargains) and store for one to two months before re-selling," a trader with a western firm said.

    Clearlake, the tanker chartering arm of Gunvor, has chartered the 308,596 deadweight tonne (dwt) Very Large Crude Carrier (VLCC) Arenza XXVII at $33,000 per day for one to four months, a Singapore-based shipbroker said. VLCCs can hold up to 2 million barrels.

    ST Shipping, Glencore's shipping arm, booked the 300,133 dwt Plata Glory for a month at $22,000 a day and has the option to extend at daily rates of $26,000 and $29,000 for the second and third month, brokers said.

    Rates for a one-year VLCC charter have fallen by almost $20,000 since January, to between $38,000 and $42,000 a day last week, according to shipping services firm Clarkson. They were $47,500 per day a year ago, Clarkson data showed.


    Crude supply disruptions and strong global consumption have sped up the pace of a market re-balancing, narrowing the gap between prompt and future-dated prices, leading traders to release stored oil starting in June.

    The number of tankers used for oil storage around Singapore fell to 30 this month from 40 in May, live shipping data on the Eikon terminal compiled by the Reuters Oil and Analytics team showed.

    Unsold crude cargoes for loading in August have piled up as Asian refiners head for maintenance. Spot differentials for August-loading cargoes have dropped after monthly prices from Middle East crude sellers rose. About 1 million barrels a day of processing capacity in Asia will be shut for maintenance in October, according to Reuters calculations.

    Russian ESPO crude and Abu Dhabi's Murban are seen as prime candidates for storage as traders bet on a price rebound.

    Still, the current contango structure might not fully cover storage costs, making it risky to hold onto oil for long.

    "They will need to manage oil in storage actively since the contango has only widened for prompt months," a Singapore-based trader said.

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    Modi's $27B Oil Quest Gives Services Firms A Lifeline

    India is offering global oilfield service providers starved of new contracts a $27 billion lifeline as the government's ambition to cut fuel imports drives fresh investment.

    (Bloomberg) -- India is offering global oilfield service providers starved of new contracts a $27 billion lifeline as the government’s ambition to cut fuel imports drives fresh investment.

    Spending plans are ratcheting up and stalled projects restarting after the government in March announced pricing freedom for natural gas from deepsea fields that begin production this year. Coming at a time when the cost of rigs and services has halved, that’s prompted India’s largest explorer Oil and Natural Gas Corp. to launch its biggest development campaign yet. Reliance Industries Ltd. is preparing to restart work at four offshore oil and gas blocks.

    The flurry of activity is providing some respite to services companies including Schlumberger Ltd., Technip SA and Halliburton Co. that were stung last year by more than $100 billion in slashed spending by explorers as oil collapsed. Investments in India are growing to meet Prime Minister Narendra Modi’s target of cutting import dependence by 10 percent over six years as increased consumption puts the nation on track to become the world’s third-largest oil consumer.

    “In India, there are two to three major identified projects and they are probably bigger than anything else going on in rest of the world,” Technip India’s Managing Director Bhaskar Patel said in an interview. “India is a place where there is work available.”

    India’s hydrocarbon resources still remain highly undeveloped and the government’s new liberal approach is nudging companies to invest in tapping them. The measures are expected to boost gas output by 35 million standard cubic meters a day and unshackle projects worth 1.8 trillion rupees ($27 billion), Oil Minister Dharmendra Pradhan had said when the policy changes were announced.

    About 90 percent of the new spending would go to companies that provide services from drilling to testing and the laying of infrastructure.

    Halliburton is positioned to participate in “the country’s ambitious plans to increase its domestic production,” the company said in an e-mailed response to questions. “India plays a crucial role for sustained development in the region for Halliburton.”

    The Indian government’s initiatives will increase the pace of exploration, ONGC Chairman Dinesh Kumar Sarraf said.

    ONGC will contract deepwater drill ships and dozens of jack-up rigs for a $5-billion development program in the Krishna-Godavari Basin, he said. The company intends to spend 11 trillion rupees by 2030 to raise output.
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    Argentina oil workers go on strike, warn of longer walkout

    Argentina oil workers go on strike, warn of longer walkout

    Oil workers in much of Argentina launched a 48-hour strike Monday, with a labor union saying the action could be extended if demands for higher wages are not met.

    If oil producers and services companies do not agree to increase wages by at least 30% before the end of Tuesday, the strike will continue through Wednesday, Jorge Avila, secretary general of the Union of Private Oil and Gas Workers in Chubut, said in a statement over the weekend.

    If there is still no response by the end of Wednesday, then the walkout will go on "indefinitely", he said.

    The strike had originally been planned for much of Patagonia, a southern region that produces most of the country's oil and natural gas. But it gained adherence by unions elsewhere in the region as well as in the northwestern province of Salta, according to the statement.

    This means the strike is affecting about 99% of Argentina's 530,000 b/d of oil production and 88% of its 123 million cu m/d of gas, according to data from industry group Argentine Oil and Gas Institute.

    Avila said workers at two oil-loading terminals in Patagonia also walked off the job, interrupting crude shipments for domestic and international delivery.

    Argentina exports about 10% of its crude production, and ships the rest domestically to refiners, most of them in the central region of Buenos Aires.

    Oil companies have offered to raise wages by around 20%, half of the 40% that workers want in line with an annual inflation rate of 42% in May.

    "There are workers earning 15,000 or 18,000 [Pesos per month] ($1,000-$1,200) who cannot make it to the end of the month," Avila said.

    The national government will seek to negotiate a truce between oil companies and the unions at a meeting Tuesday in Buenos Aires.

    In a statement cited by the Argentina press, the Chamber of Hydrocarbon Exploration and Production, an industry group, said the strike will hit oil and gas production "in the entire country".
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    Squamish Nation approves Woodfibre LNG feeder pipeline

    Squamish First Nation approved the environmental assessment agreement for the proposed pipeline that will supply natural gas to the Woodfibre LNG project.

    The Squamish Nation chiefs and council voted to approve the environmental assessment agreement for the proposed Eagle Mountain – Woodfibre Gas pipeline project and issued an environmental certificate to FortisBC.

    Woodfibre LNG said in its statement that Squamish Nation conducted an “independent environmental review” of the project. The First Nation also approved the use of the Mount Mulligan location near Squamish for FortisBC’s natural gas compressor station. It has already approved the Woodfibre LNG project in October last year.

    The Eagle Mountain – Woodfibre Gas pipeline project is an expansion of FortisBC’s existing Vancouver Island natural gas transportation system to provide natural gas service to the Woodfibre LNG project. The project includes building about 47 kilometres of pipeline between Coquitlam, British Columbia and the Woodfibre LNG site.

    The Woodfibre LNG project is a proposed natural gas liquefaction and export facility located at the former Woodfibre Pulp and Paper Mill, about seven kilometres southwest of Squamish.

    The project is expected to start production in 2020 with an annual capacity of approximately 2.1 million tons of liquefied natural gas.
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    Norway trade unions say 755 oil workers could go on strike

    About 755 Norwegian oil workers could go on strike from Saturday if employers and unions fail to agree a new wage deal before a Friday deadline that would limit output from Western Europe’s top producer, trade unions said on Monday.

    A final round of mandatory talks will be hosted by a state mediator on June 30 and July 1 in an effort to avoid a conflict that could start the following day..

    Employers have argued that a plunge in oil prices since 2014 must be accompanied by cost cuts and flexible work practices to help make the industry stay competitive. Unions say members should receive pay increases matching those in other industries.

    The Industri Energi union said it would take out 524 members if the talks break down, affecting the Statoil-operated <STL.OL> Oseberg, Gullfaks and Kvitebjoern fields.

    The SAFE union said it would take out 156 workers on ExxonMobil’s <XOM.N> Balder, Jotun and Ringhorne fields.

    In addition, 75 workers on Engie’s <ENGIE.PA> Gjoea field would also go on strike, the smaller union Lederne said.

    A protracted strike may ultimately result in more than 7,400 workers going on strike, data from the state mediator’s office showed.

    “We do of course wish for the mediation to lead to a deal, so that a conflict is avoided,” the Safe union said in a statement.

    The three labour unions will negotiate on behalf of the oil workers, while Norwegian Oil and Gas will represent oil and gas firms.

    In 2012, a 16-day strike among some of Norway’s oil workers cut the country’s output of crude by about 13 percent and its natural gas production by about 4 percent.
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    Venezuela’s Oil Output Decline Accelerates as Drillers Go Unpaid

    Venezuela’s oil output, already the lowest since 2009, is set to slide further this year as contractors scale back drilling after the cash-strapped country fell more than $1 billion behind in payments.

    The Latin American nation’s oil production, which generates 95 percent of export revenue, will decline by about 11 percent to 2.1 million barrels a day by the end of the year, Barclays Plc estimates. Output is falling largely because oil-services companies aren’t being paid, according to the International Energy Agency.

    Venezuela’s economy has been in crisis since crude prices slumped, with sporadic looting as the desperate population fights for food and other essentials. President Nicolas Maduro has pledged to continue payments to bondholders, while the partners of state-run oil company Petroleos de Venezuela SA, known as PDVSA, aren’t paid. Further output decline in the OPEC nation, combined with disruptions in fellow members Nigeria and Libya, could leave the oil market short of supply next year.

    “The situation is becoming more and more difficult for oil services in Venezuela,” Baptiste Lebacq, an analyst at Natixis SA in Paris, said by phone. As long as oil prices are at current levels, it’ll be “very difficult” for PDVSA to pay the contractors, he said.

    Schlumberger Ltd., the world’s largest oil-services company by market value, was owed $1.2 billion by PDVSA as of March 31, according to an April 27 filing. Halliburton Co. said last month the amount it was owed rose 7.4 percent in the first quarter to $756 million.

    The number of rigs drilling for oil in Venezuela fell by 10 to 59 in May, the lowest level in more than a year, according to Baker Hughes Inc.

    Schlumberger has reduced activity in line with the drop in payments, the company’s president, Patrick Schorn, told investors last week at the Wells Fargo West Coast Energy Conference. It still works in the country and could boost operations if “new payments models” are implemented, he said.
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    Total wins stake in Qatar's Al-Shaheen oilfield

    Total has won a 30 percent stake in a new 25-year contract to operate Qatar's largest offshore oilfield, officials said on Monday, in the second major upstream development deal for the French oil firm in the Gulf region in as many years.

    State-owned Qatar Petroleum (QP) will keep the remaining 70 percent in the new joint venture for the Al-Shaheen field, which is 80 km (50 miles) off Qatar's coast and currently produces around 300,000 barrels per day (bpd).

    Six international oil firms including BP (BP.L) and Royal Dutch Shell Plc (RDSa.L) have bid to operate the oilfield.

    The deal announcement on Monday is a blow to Denmark's A.P. Moller-Maersk, which has been operating the oilfield since 1992.

    For years it was expected that Maersk Oil would renew its 25-year production agreement on Al-Shaheen field when its license runs out in 2017. But the Gulf state surprised the company last year by putting out a tender for the field.

    Maersk submitted a new bid for the field but Total has made the best offer.

    "Total was the best bidder, we are happy to see Total wins that process," Saad al-Kaabi, CEO of state-owned Qatar Petroleum (QP) said at a news conference in Doha on Monday.

    Total plans to invest more than $2 billion in developing the Al-Shaheen oilfield over five years, the company's chief executive said.

    "We have a plan to invest for five years 2017-2022, more than $2 billion in that field in order to integrate technology," Total's CEO Patrick Pouyanne told the news conference in Doha.

    "Our first objective is to maintain 300,000 barrels a day. Currently that's not a given as there's a natural decline (in production) as its a complex field," Pouyanne said.

    "If we have opportunities to increase production we will, there are parts of the field which have not been developed," he added.

    Total will be in charge with operating the oilfield starting July 14, 2017, and a new company named North Oil Company will be created to manage the joint venture, Kaabi said.

    The new deal is a boost for Total, which in January last year, it became the first oil major to renew a 40-year onshore concession in the United Arab Emirates, putting its peers under pressure to improve terms after the French firm made the best offer.

    In a statement Maersk Oil said it will be "redeploying a number of its employees which today are based in Qatar elsewhere in its global organization."

    "The majority of remaining employees in Qatar are expected to be offered employment by the new operator," it added.

    QP's Kaabi said all of Maersk Oil's employees in Qatar will be guaranteed a job in the new company created for the venture.
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    ARAMCO briefing on the Shale Gas. 600tcf. 23bcf per day target.

    600 Tcf Shale Gas Reserves
    “Saudi Arabia will be the next frontier after the U.S., where shale and unconventionals will make a significant contribution to our energy mix, especially gas,” he said, according to Reuters. His predecessor as minister, Ali al-Naimi, also had gone on record last year stating that Saudi Arabia estimated it had about 16.9 Tcm (600 Tcf) of shale gas reserves, which would put it in fifth place in the world rankings for total unconventional reserves.

    It’s been less than five years since Aramco launched its unconventional gas initiative, which among other things eventually saw it open in late 2014 its Aramco Research Center in Houston. Operated by Aramco Services Co., the facility’s objective was and remains to conduct unconventional upstream research in exploration, drilling, field development and project management. Its location means it has been able to access world-leading U.S. drilling and production expertise.

    That know-how already is paying dividends. Over the last two years the company has in particular been focused on potential reserves in its frontier Northern Region, where it is committed to developing shale gas to feed a planned 1,000-MW power generation plant. 

    Exploration Program
    An exploration program in the kingdom’s northwest, South Ghawar and Rub’ al-Khali (Empty Quarter) area has seen promising results emerge in parts, particularly from the Jafurah gas basin. Jafurah is located southeast of Ghawar, the world’s largest conventional oil field. 

    “Our exploration efforts have resulted in finding big volumes of shale gas in the Jafurah Basin, close to Al-Ahsa [a town in eastern Saudi Arabia]. They are highly promising quantities and economically feasible as they contain a high rate of liquids; activities to evaluate the reserves are ongoing,” Amin Nasser, Aramco’s CEO, said at an industry event in the kingdom in March, according to Reuters.

    Part of Saudi Arabia’s increased focus on unconventional gas is because it wants to step up its ability to manufacture more specialty petrochemicals rather than lower value petrochemicals. The country is already one of the largest producers of petrochemicals in the world. But its continued plan to expand its downstream capabilities needs to be fed by a corresponding expansion of its upstream gas resources.

    23 Bcf/d Gas Goal
    Nasser said earlier this year that Aramco plans to almost double its total gas production to 651 MMcm/d (23 Bcf/d) within a decade. Up to 113 MMcm/d (4 Bcf/d) of that could come from unconventional gas sources.

    The advances in the Jafurah shale gas play have given it increased confidence that it can deliver on this promise despite the challenges that it faces there. According to a technical paper given at the SPE Asia Pacific Unconventional Resources Conference late last year, sweet spot identification within the Jurassic Tuwaiq Mountain Formation in the Jafurah Basin “represents a major challenge as it requires a large number of wells drilled over a wide geographical area with high associated costs.”

    Knowing that innovative drilling, completion and stimulation practices were required, a study was carried out to identify and maximize potential frack stages and placements. The initial results from vertical wells drilled in the basin have proved, according to the paper, that proppant can be successfully placed and indicated the presence of a potential gas-rich play within the same source rock.

    “Subsequent horizontal wells were the first liquid-rich gas carbonate horizontal wells with ultralow shale permeability in Saudi Arabia. The first horizontal wells had excellent gas production with significant amounts of condensate. By further building on experience from the drilled and stimulated wells, the lessons learned provide a foundation for the completion of future unconventional gas wells in the Jafurah Basin,” it stated.

    Contracts Awarded
    This talk of “potential” resources is not just hot air, however. Real-world contracts already have been awarded for various pilot-stage projects.

    In August 2015 Japan’s JGC Corp. was awarded a contract to build shale gas facilities, including processing facilities, wellheads and pipelines, at Turaif in northwest Saudi Arabia. Called “System A” and estimated to be worth nearly $200 million, the project will be located near a large mining project called Waad al-Shamal currently under development.

    JGC will build the facilities for Saudi Aramco with capacity put at 1.8 MMcm/d (66 MMcf/d). Although not formally confirmed by Saudi Aramco, a separate press release by Maloney Metalcraft confirmed it had secured a $2 million contract from JGC Gulf International Co. to supply gas treatment packages.

    Aramco is developing the infrastructure for processing shale gas from the Jalamid Field in the Al-Jouf and Northern Border Regions, according to Maloney’s press release. “The first phase of this project (System A) will involve gathering gas from the ST-53A area of these fields, routing it to an engineered surface facility location [and] then transporting it about 30 km [18.6 miles] via pipeline to a customer. The contract with JGC Gulf International, which is contracted by Saudi Aramco, covers the initial four gas treatment separation and filtration packages in System A.”

    System B of the project was, it continued, due to be tendered as an engineering, procurement and construction contract in second-quarter 2016 and would require four times the number of packages as System A. 

    Austen Adams, managing director of the energy division of Maloney’s parent company Avingtrans, said in the release the contract was its first shale gas project and demonstrated “that new business opportunities are available for companies with the recognized experience and expertise necessary to design and build performance-critical components.”

    The full project, including both systems, is projected to supply up to 5.6 MMcm/d (200 MMcf/d) of unconventional gas by 2018.

    Early-stage Projects
    These early-stage projects, along with Saudi Aramco’s continued push to overcome the many technological and environmental challenges that remain—not least of which is the need to find enough water in the middle of the Arabian desert to help it carry out the required levels of hydraulic fracturing—means that the pace of unconventional activity in the kingdom will be sustained, both in terms of R&D work and exploration and appraisal programs. That also will entail further work on both adopting and adapting techniques and know-how developed by shale producers in North America such as the factory approach to drilling.

    Saudi Arabia’s consistent long-term strategic approach to oil and gas is clearly guiding its approach to shale. With domestic demand for gas in the kingdom set to almost double from its 2011 level of 99.1 Bcm/year (3.5 Tcf/year) by 2030 and with the costs of unconventional gas production likely to continue to fall, the country’s shale resources remain increasingly attractive.

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    Iran's new oil investment contract to be ready this summer - minister

    The first of Iran's new oil and gas investment contracts for international companies will be launched this summer and will invite bids to develop 10-15 fields, oil minister Bijan Zanganeh was quoted by the SHANA news agency as saying.

    The Iran Petroleum Contract (IPC) is a cornerstone of the country's plan to raise crude production to the pre-sanctions level of four million barrels per day (bpd), and the OPEC member desperately needs $200 billion in foreign money to reach the goal.

    Its launch has been postponed several times as hardline rivals of pragmatist President Hassan Rouhani resisted any deal that could end a buy-back system dating back more than 20 years under which foreign firms have been banned from booking reserves or taking equity stakes in Iranian companies.

    Zanganeh said a final draft for the contracts will be approved by the government shortly after some amendments to appease both critics and foreign companies.

    "Some of the critics were accusing us of treason. We could not have a discussion with them. The other group had raised some issues on the model of these contracts and we held meetings with them," Zanganeh said.

    Zanganeh said that the contracts were amended to enable Iran to develop the oil and gas fields either through a buy-back system or other methods. He did not elaborate.

    Oil majors have said they would go back to Iran if it made major changes to the buy-back contracts of the 1990s, which companies such as France's Total or Italy's Eni said made them no money or even incurred losses.

    Attached Files
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    Woodside, Mitsui to invest $1.9 billion in Greater Enfield oil development

    Australia's Woodside Petroleum Ltd and Japanese trading firm Mitsui & Co Ltd said on Monday that they would invest $1.9 billion to develop the Greater Enfield reserves, a group of oil fields off Western Australia.

    The move is the latest indicator that some life is returning to the drained offshore oil and gas drilling sector, which was all but knocked out by a 70 percent slump in oil prices between 2014 and early 2016. But with prices up nearly 30 percent this year, activity is starting to pick up.

    "With development costs of less than $28 a barrel, Greater Enfield is an attractive project in a low-price environment," Woodside Chief Executive Peter Coleman told Reuters in an email.

    The recoverable reserves of the new Laverda oil fields and the Cimatti fields in the Greater Enfield development are estimated at 69 million barrels of oil equivalent, a little more than twice the daily output of the OPEC.

    Woodside, which holds a 60 percent stake in Greater Enfield, and Mitsui that owns the rest will invest in drilling production wells and constructing subsea facilities, with an aim to start crude oil production by around mid-2019.

    "We've made a final decision as development costs have fallen due to sliding oil prices," a Mitsui spokeswoman said.

    The new oil fields can use the floating production storage and offloading facilities currently in use in the existing Vincent oil field, further cutting expenses, she added.

    Earlier in the day, commodities giant BHP Billiton said it planned to boost its fiscal 2016 exploration budget, focusing on offshore developments in the Gulf of Mexico and off the coast of Western Australia.

    Oil futures are now near $50 per barrel, off more than 12-year lows plumbed earlier this year but still far below their 2014 peaks of above $100. The price uncertainty is, however, far from over, especially with Britain's decision to leave the European Union dragging on sentiment. [O/R]

    Weak energy markets had forced Woodside and its partners, in March, to shelve plans for the $30-billion Browse floating liquefied natural gas (LNG) project off Australia.

    Coleman subsequently said future LNG projects would likely be phased, rather than big one-off developments.

    U.S. gas prices have also risen more than 10 percent this year, prompting Japan's Tokyo Gas to buy a 25 percent stake in an Eagle Ford shale gas formation.

    Attached Files
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    Exxon's Liza is 700mb?

    ExxonMobil hit hydrocarbons in its first appraisal of the Liza 2 oil find offshore Guyana, according to the country’s natural resources minister.

    Guyana energy minister Raphael Trotman told the Associated Press that the Liza-2 appraisal well had encountered hydrocarbons and that ExxonMobil was planning the next well in its drilling campaign.

    Such a result was not unexpected and ExxonMobil indicated it planned to perform a production test on the appraisal well to learn more about the performance of the Liza reservoir following the initial discovery in 2015, which some have said could be upwards of 700 million barrels.

    The partners located the Liza-2 well on the structure’s flank and planned to sidetrack it back towards the centre of the reservoir for the production test, which has already started.

    US partner Hess said drillship Stena Carron will then move about 32 kilometres north-west on the Stabroek block, where the partners are targeting “look-alike” structures on prospects tentatively named Skipjack and Payara.

    ExxonMobil operates Liza on the Stabroek block with a 45% stake with Hess holding 30% and China National Offshore Oil Corporation-owned Nexen on 25%.

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    Expanded Panama Canal open, first LNG transit in late July

    The opening of the expanded Panama Canal paves the way for transit of liquefied natural gas carriers transporting volumes from the emerging US Gulf Coast LNG export projects.

    Speaking at the opening on Sunday, Panama Canal Administrator and CEO Jorge L. Quijanosaid the reservation for the first LNG vessel, which will transit in late July, has been made.

    The inaugural transit of the expanded Panama Canal began with the passage of Neopanamax vessel COSCO Shipping Panama on its way to Asia, port authority said in a statement.

    The vessel set sail on June 11 from the Greek Port of Piraeus carrying 9,472 TEUs and measuring 299.98 meters in length and 48.25 meters in beam.

    It entered the Agua Clara Locks on the Atlantic side of the country and concluded its transit crossing through the Cocoli Locks on the Pacific side.

    The newly expanded canal has the capacity to accommodate LNG carriers with the capacity to transport 173,000 cbm to 180,000 cbm of liquefied natural gas.

    In 2015, ACP approved a tolling structure for LNG carriers, noting that tolls will be based on cubic meters.
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    Chevron sets date for first Gorgon LNG cargo after shutdown

    Chevron’s Gorgon LNG project in Australia, one of the largest natural gas projects in the world, is expected to ship its first cargo of LNG on July 3 after the plant was shut down due to mechanical problems in March.

    The facility on Barrow Island halted production soon after the first cargo of the chilled fuel was shipped in March due to a mechanical issue in the propane refrigerant circuit on Train 1.

    The second cargo from the US$54 billion LNG project will be shipped onboard Teekay’s 165,500-cbm Marib Spirit, according to a shipping schedule posted on the Chevron Australia website.

    Energy giant Chevron expects to export in total 5 cargoes of the chilled fuel from the Gorgon plant in July.
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    Nigeria Seeks $40-$50 Billion in Oil Investment as Output Rises

    Nigeria Seeks $40-$50 Billion in Oil Investment as Output Rises

    Nigeria is seeking $40 billion to $50 billion in investment in oil projects as the OPEC producer said it raised crude output to as much as 1.9 million barrels a day as of two days ago.

    The African producer signed a potential deal for $8.5 billion of investment with China North Industries Group Corp., Nigerian State Minister for Petroleum Resources Emmanuel Ibe Kachikwu said in a Bloomberg television interview in Beijing on Monday. The country’s crude output should rise to 2.2 million barrels a day next month if repairs to a pipeline are completed, he said.

    “We’re looking to raise about $40 to $50 billion,” Kachikwu said in the Bloomberg interview. “Going to places like China, which have a huge capacity to put money in the oil sector, is very helpful.”

    Low oil prices, which have fallen by more than half in the past two years, are forcing some of the world’s largest drillers to seek investment to maintain and expand output. Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said in April the government plans to list less than 5 percent of the state producer known as Saudi Aramco, which could turn the world’s biggest oil exporter into the largest publicly traded firm with a value in the trillions of dollars. Russia is seeking buyers for 19.5 percent of Rosneft PJSC.

    Militant attacks earlier this year reduced Nigeria’s oil production to 1.3 million barrels from from 2.2 million a day, and output was between 1.8 million and 1.9 million as of two days ago, Kachikwu said. Crude prices may end the year between $50 and $55, he said.
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    Weekly U.S. Oil Rig Count: A Large Decline Of Low Quality Rigs

    A seemingly large decline in the domestic oil rig count although consisting mostly of vertical rigs. Whereas last week's increase in the oil rig count (nine rigs) was concentrated in the Permian and in shale producing regions, this week's decrease is concentrated in lower quality basins. The Permian basin, the quintessential oil producing basin in the country, actually increased four oil rigs, same as last week.

    Source: Baker Hughes

    * Total U.S. oil rig count decreased by seven almost eliminating the nine rig increase of the previous week. However, these are mostly vertical rigs and in less productive basins. Despite the large decrease in rig counts, the Permian still posted a relatively large increase in the count.

    * Horizontal rigs declined by one following a twelve rig increase during the last three weeks. Directional rigs declined by two.

    * Natural gas rigs increased by four taking advantage of the current rally (compared to the sub $2/mcf lows) in natural gas prices.

    Source: Baker Hughes, Orangutan Capital

    * Four new rigs in the Permian; the most established oil-producing basin in the country. The rig count in the Permian is now back to March levels (which are still very low by historical standards). This week's four rig increase follows a similar four rig increase during the previous week.

    * Two new rigs in the Williston basin. This is a shale play and follows last week's six rig increase in the Barnett and Haynesville basins.

    * Four rig decrease in Eagle Ford and Cana Woodford.

    * A very large nine rig decrease in the 'Others' region. This change accounted for most of the decline during the week and consists of rigs in Louisiana (onshore) and Oklahoma.

    Attached Files
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    China suspends oil price adjustment

    China's top economic planner will not adjust domestic retail oil prices as global prices stayed below its official pricing mechanism, it was announced Thursday.

    Under the current mechanism, prices of refined oil products are adjusted when crude prices translate into a change of more than 50 yuan (over 7.5 U.S. dollars) per tonne for gasoline and diesel over a period of 10 working days.

    The National Development and Reform Commission (NDRC) announced in January that China will not cut its fuel prices when international oil prices fall below 40 U.S. dollars a barrel, which immediately triggered a suspension on Jan. 27.

    The limit aims to buffer the negative effects of price swings, the NDRC said.

    The NDRC is closely watching the current pricing mechanism and will continue to improve it based on market changes, according to an NDRC notice.
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    Court says ETE can walk away from $20 billion Williams takeover

    Energy Transfer Equity won a court ruling on Friday that would allow the pipeline operator to walk away from its more than $20 billion takeover of rival Williams Cos Inc, a deal that Energy Transfer agreed to in September but soured on in January.

    A Delaware judge ruled that Energy Transfer, or ETE, had not breached the merger agreement when in March it cited a tax problem that would prevent the deal from closing by the agreed upon termination date. Under the terms of the deal, if the deal is not completed by June 28, ETE can walk away without penalty.

    Williams said in a statement that it disagreed with the judge's ruling and will take "appropriate actions to enforce its right." It said in a brief filed with the court earlier this week that it would appeal any ruling in favor of ETE.

    Williams' shareholders are set to vote on Monday - a day before the deal's deadline. The company said its board still recommends shareholders vote for the deal.

    The two companies sued each other in Delaware Chancery Court in May after months of heated disagreement. ETE had been trying to back out of a deal that had become less attractive in the wake of oil price fluctuations and a decline in its share price.

    ETE argues that it is not able to close the deal because its tax advisers at Latham & Watkins could not determine that the deal would be tax-free, as anticipated when the agreement was originally signed.

    Delaware Vice Chancellor Sam Glasscock ruled that it was not material whether or not Energy Transfer and its chief executive, Dallas billionaire Kelcy Warren, had been trying to break the deal because he was persuaded that the tax issues uncovered by ETE were valid.

    "If a man formerly desperate for cash and without prospects is suddenly flush, that may arouse our suspicions. Nonetheless, even a desperate man can be an honest winner of the lottery," Glasscock wrote in a 59-page opinion.

    Energy Transfer units were up over 8 percent in after-the-bell trading following the ruling. Williams shares fell more than 6 percent.


    It is rare for judges to decide that a merger contract is unenforceable, said Brian Quinn, a professor at Boston College Law School.

    "Buyers don't get to walk often. In 2008, during the crisis, a rash of buyers tried to walk, but the courts wouldn't let them," Quinn said.

    He noted that the chief justice of Delaware's Supreme Court, which would hear any appeal filed by Williams, ordered Tyson Foods Inc to buy rival IBP Inc in 2001 after Tyson tried to back out of that deal.

    "If I were Williams I would be quoting that opinion liberally" in an appeal, Quinn said.

    Energy Transfer's Warren set his sights on Williams last year to transform ETE into one of the world's biggest pipeline networks. He launched an unsolicited bid last June and reached a deal in late September that was then worth $33 billion.

    The timing was poor. Oil and gas prices dropped significantly after the deal was announced, the companies' shares fell sharply and investors started to worry that the $6 billion cash portion of the deal would saddle ETE with too much debt.

    ETE made it clear that it no longer believed the deal was attractive. It slashed estimates for expected cost savings and said it would likely have to cut distributions to shareholders entirely next year if it had to complete the deal. It also said it would have to cut jobs substantially in Williams' home state of Oklahoma.

    The company also launched a convertible share offering that effectively shields Warren and other top ETE shareholders from a distribution cut.
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    TransCanada formally seeks NAFTA damages in Keystone XL rejection

    TransCanada Corp is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion in damages, the company said in legal papers dated Friday.

    TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website.

    "Unfortunately, the parties were unable to settle the dispute."

    TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement (NAFTA) provisions, seeking to recover what it says are costs and damages.

    The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast.

    Obama rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy.

    TransCanada is suing the United States in federal court in a separate legal action, seeking to reverse the pipeline's rejection.

    NAFTA, whose arbitration provisions allow companies to challenge governments before international panels, has been a target of recent anti-free-trade sentiments in the United States.

    The heads of NAFTA members, Canada, the United States and Mexico, are expected to meet in Ottawa for a North American leaders' Summit on June 29.

    Canada was supposed to host the meeting early last year but canceled it amid tension between then Prime Minister Stephen Harper and Obama over the Keystone XL pipeline.

    TransCanada and the U.S. Department of Energy did not immediately respond to requests for comment.
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    ChemChina to take 40 pct stake in Rosneft's petrochemical project

    Russia's biggest oil producer Rosneft said on Saturday that China National Chemical Corporation (ChemChina) would take a 40 percent stake in its planned petrochemical complex VNHK in Russia's Far East.

    "The participation of ChemChina will allow Rosneft to optimise the project financing and jointly organise sales of the high-margin products of the future complex on the premium markets of the Asia-Pacific region," Rosneft said in a statement.

    Rosneft and ChemChina also signed a new one-year oil supply contract, the Russian company said without providing volumes or financial details.
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    Chevron Vaca Muerta Costs Drop 20% Nearing Goals, Moshiri Says

    The cost to drill wells at Argentina’s Vaca Muerta, site of the world’s second-biggest shale reserves, has dropped 20 percent this year, putting Chevron Corp. and its partners closer to meeting spending goals.

    Drilling costs at the Loma Campana field in Vaca Muerta have declined to $11.2 million per well from $14 million in the last three months of 2015, Ali Moshiri, president for Latin America and Africa, said in an interview with Bloomberg News in Buenos Aires on Thursday. That’s putting the joint venture with YPF SA closer to its goal of drilling wells at less than $10 million, he said.

    “There are a lot of companies watching Chevron and YPF in Argentina,” Moshiri said. “The performance of those wells are coming very close, very competitive to the United States.”

    Oil companies including Exxon Mobil Corp. are rushing to tap Argentina’s shale reserves, the largest after the U.S., as low oil prices put pressure on producers in the U.S. Output in the U.S. has dropped this year as prices plunged, while producers in Argentina have maintained production levels because of government subsidies to stimulate extraction.

    Chevron signed an agreement with state-owned YPF in 2013 to invest $1.6 billion in a pilot program to drill at Vaca Muerta in the Neuqen province. The joint venture, worth about $16 billion, has drilled about 400 wells, Moshiri said.

    The government of former President Kristina Fernandez de Kirchner raised the price of oil produced domestically to $75 a barrel from $45, gave drillers tax exemptions and capped royalties at 15 percent since 2012, creating a boom in the oil industry domestically as it struggled globally because of falling prices.

    “We are a long-term business; we don’t try to do anything for just a few years,” Moshiri said. “A few years ago no one knew about Chevron in Argentina. Now we are the largest investor in the oil industry.”
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    Police Confirm Attack On Shell Facility In Nigeria

    Police in the area of Imo in Nigeria have confirmed that there has been an attack on a Shell Petroleum Development Company (SPDC) facility there. The attack, which was in the Ohaji/Egbema Local Government area took place early Thursday.

    One source told the News Agency of Nigeria that the attack came at 5:30 in the morning and reported an explosion that created a great deal of flame. That source could not confirm if anyone was killed in the incident.

    Andrew Enwerem, who is the Public Relations Officer of police in the state, did not disclose any details about the incident, and it is still not known who is behind the attack, or the amount of damage done to the facility. SPDC spokesperson Precious Okolobo noted that the Trans Niger pipeline that runs through the area has been closed for repairs, but said that the company is investigating the Thursday attack.

    According to the Nigerian News Agency, no group has claimed responsibility for the incident.
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    Gazprom expects profit ‘to more than triple’

    Russian giant Gazprom is expecting last year’s profit to more than triple year-on-year despite the declining oil prices.

    Gazprom’s deputy chairman Andrey Kruglov said that, while “it is very hard to forecast net profit”, the company expects a boost.    

    “The decline in global energy prices is putting pressure on the financial results of all oil and gas companies across the world, and Gazprom is no exception,” Kruglov said.

    “Gazprom’s net profit for last year will largely depend on the still volatile dollar rate at the year-end. According to our estimates, the net profit margin will more than triple, exceeding 10%, in 2015 against 2014,” he said.

    “For the net income forecast, we expect it to considerably surpass last year’s figure, as in 2014 the net income collapsed mainly due to non-cash losses on currency differences as a result of a major weakening of the ruble.”

    “We estimate the company’s earnings before interest, tax depreciation and amortisation (Ebitda) to be around $30 billion in 2015,” he added.

    The state-run company posted a net profit of 159 billion roubles ($3.07 billion) in 2014, a 86% drop compared to 1139 billion roubles in the previous year, due to appreciation of the US dollar and the Euro against the rouble.
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    PetroChina to start new refinery in Oct, boost China crude imports

    PetroChina, China's second-largest state-run refiner, aims to start operating a new refinery in the country's southwest in October after several delays, boosting the nation's already-surging crude imports.

    The 260,000-barrels per day Anning plant in Yunnan province would be the first major Chinese refinery to come online in nearly two years, amid a scaleback by state energy firms in adding refining capacity as lower oil prices slashed earnings.

    Saudi state oil firm Aramco is looking to invest $1-1.5 billion in the refinery as well as the retail assets of PetroChina, sources told Reuters last year. Aramco was not immediately available for comment on Friday.

    "The latest schedule for the Yunnan refinery start-up is October," said a PetroChina spokesperson, without elaborating. The refinery has been delayed several times as tightening environmental regulations forced PetroChina to resubmit approvals for changes to plant configurations.

    Crude imports into China, the world's second-largest buyer, soared by 16 percent, or over 1 million bpd, in the first five months of 2016 from the same period last year, the fastest growth in more than a decade.

    That demand, which has helped push oil prices back near $50 a barrel, has been driven by Chinese oil firms building stockpiles and fresh appetite from a new group of importers, the independent plants allowed to import crude for first time since late last year.

    A PetroChina official with knowledge of the company's oil trade said that if a deal was finalised with Aramaco, the Saudis would supply at least part of the refinery's crude oil requirements. He declined to be identified as he was not authorised to speak with media.

    Saudi Arabia has for three straight months lost to Russia the spot as the top crude supplier to China.

    The plant is designed to process high sulfur crude oil that will be shipped in tankers and then pumped through a pipeline connecting the southwest coast of neighbouring Myanmar and Yunnan, said the industry sources. The last target for the start of operations was the middle of this year.

    PetroChina parent CNPC early this year started trial operations of the 2,400-kilometre (1491 miles), 440,000-bpd pipeline that runs parallel to an operating natural gas pipeline, but has to wait for the full completion of the refinery for commercial start-up.

    The refinery start-up had also been delayed as the new Myanmar government has been reviewing the deal on the pipeline, said the second PetroChina official.

    Local Chinese media have reported the company modified some of the 15 refining units, including adding a 1.2 million tonnes per year delayed coking unit, which allows for the processing of heavier crude oil.

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    EU Gas prices start financing US LNG Exports.

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    Alternative Energy

    Mercedes Benz to take on Tesla in home battery storage in Australia

    Australia’s burgeoning residential battery storage market is set to have yet another contender come September, with the release of a modular 2.5kWh lithium-ion product by prestige car maker Mercedes Benz.

    Mercedes Benz Australia plans to unveil the home battery storage offering at its Melbourne headquarters in Mulgrave, along with an on-site four-car charging station, made up of the lithium-ion battery packs and solar panels.

    The plan is for the company to sell the batteries to customers as a package with rooftop solar – the cost per 2.5kWh battery unit has not yet been released – through an as-yet unnamed “electricity retailer” partner.

    According to Mercedes Benz German parent company, Daimler, up to eight 2.5kWh modules can be combined to make a capacity of up to 20kWh, allowing solar households to “buffer surplus… power with virtually no losses,” and increase their self-consumption to as much as 65 per cent.

    The batteries have been available on the German market – where they are also sold as packages with solar by a network of sales partners – since April of this year, and according to the website have generated “tremendous interest” and numerous orders.

    The move into the Australian residential energy storage market, says Mercedes head of corporate communications David McCarthy, is a natural progression, and goes hand in hand with the roll-out of electric cars: Mercedes is releasing three new plug-in hybrid EV models in Australia in July.

    It also puts Mercedes into direct competition with fellow prestige EV maker, Tesla, whose 7kWh Powerwall battery was released to much fanfare in Australia in December last year.

    “The future says this is one of the directions that people are going to want go in,” McCarthy told One Step Off T

    he Grid on Wednesday. “It’s not enough to charge your car… people who are buying a plug-in hybrid want to know where the energy is coming from and have the ability to generate the energy and store it.”

    In terms of demand for the Mercedes home battery, McCarthy said that the level of interest being shown in Australia indicated they might move a few hundred a year, but that it was “unchartered territory”, so difficult to predict.
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    BMW to enter home energy storage market

    BMW has announced plans to enter the domestic energy storage market.

    The German automotive giant will work with Beck Automation to use new or second life BMW i3 battery packs, which will have a 22 kWh or 33kWh capacity.

    That’s enough to operate a variety of appliances and entertainment devices for up to 24 hours on its own, according to BMW.

    It added the technology can be integrated with charging stations and solar panels, allowing customers to offset peak energy costs and have backup power during outages.

    Cliff Fietzek, Manager Connected eMobility at BMW of North America said: “The remarkable advantage for BMW customers in using BMW i3 batteries as a ‘plug and play’ storage application is the ability to tap into an alternative resource for residential and commercial backup power, thus using renewable energy much more efficiently and enabling additional revenues from the energy market.”

    Last year Tesla launched a battery storage system – dubbed Powerwall, for domestic and commercial customers.
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    Australian company buys 50% stake in “game-changing” graphene battery storage technology

    Australian energy technology company LWP Technologies has bought a 50 per cent share in a new, graphene-based battery storage technology that the ASX-listed company believes could “change energy markets and the way the world commutes.”

    The $1.6 million deal, described by LWP on Wednesday as a ”major value-adding step” for the company, will see it enter into a joint venture to commercialise the patent pending aluminium-graphene synthesis and battery technology with its Australian-based inventor.

    The battery – which comprises an Aluminium-Graphene-Oxygen chemistry – is said to be safer and more stable than lithium-ion batteries, and is shown to have vastly superior energy density.

    But perhaps even more significant is the patent that describes the chemical synthesis process to manufacture highest quality graphene on a commercial scale – one of the key barriers to the successful use of graphene in both battery storage applications and in solar cell development.

    LWP says funds invested will be spent on developing prototypes for the first of three patents that have been lodged, with an initial focus on the battery technology – including an “ultra fast” rechargeable aluminium-graphene-ion battery.

    The JV partners intend to license the technology to battery manufacturers and other industry participants.

    The Russian born Australian scientist behind the technology, Victor Volkov, has completed internal laboratory testing of the Al-Graphene-Oxygen battery, which has demonstrated the capacity to deliver significant benefits over lithium-ion technology, which you can see in the table below.
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    Volkov, who describes the technologies as his “life’s work”, said he was thrilled to be working with LWP to commercialise the them.

    “I look forward to creating the revolutionary prototype batteries together with LWP who have a proven track record in developing energy-related technologies from laboratory to commercial scale,” he said.

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    Shanxi's photovoltaic power generation projects go into production

    The Shanxi province, known for its abundant coal resources, will begin a new chapter of new energy power generation as 13 photovoltaic power generation projects were recently put into operation.

    The national photovoltaic demonstration base in Datong is the first 1 million-KW photovoltaic demonstration base in China, aiming to enhance the country's photovoltaic power generation technology and promote transformation of its regional economy.

    The use of photovoltaic power generation can help adjust the province's energy structure.

    With 1 million-KW of power planned, the base will ensure sufficient electricity supply in the Shanxi province. The 13 projects will be connected to the grid and will be put into operation by the end of July.

    As Shanxi prioritizes new energy through services, grid connection, scheduling and utilization, more clean energy will become available for local people.
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    Monsanto's quarterly sales fall 8.5 pct

    Seed company Monsanto Co, which rejected a $62 billion takeover offer from Germany's Bayer AG last month, reported a 8.5 percent fall in quarterly sales as demand declined due to low commodity prices.

    The net income attributable to Monsanto fell to $717 million, or $1.63 per share, in the third quarter ended May 31 from $1.14 billion, or $2.39 per share, a year earlier.

    Net sales of the company, known for its genetically engineered corn, soybean and the Roundup herbicide, slid to $4.19 billion from $4.58 billion.

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    Monsanto in talks with Bayer for 'alternative strategic options'

    Monsanto Co said it was in talks with Bayer AG's management and others regarding "alternative strategic options," a month after the U.S. seed producer rejected the German company's $62 billion takeover offer.

    Monsanto, which also reported lower-than-expected quarterly sales for the sixth straight quarter, said on Wednesday there was "no formal update on the Bayer proposal," but talks were on for the past several weeks.

    The U.S. company had not opened its books more than two weeks after rejecting the offer but left the door open to a possible deal after the companies reached an impasse over valuation, Reuters reported this month, citing sources.

    Bayer, however, has no plans to raise its offer without reviewing Monsanto's confidential information, the sources said.

    The seed and agriculture chemical industry has seen several deals in the past year as low crop prices and belt-tightening by farmers put pressure on earnings.

    The net income attributable to Monsanto plunged more than 37 percent to $717 million, or $1.63 per share, in the third quarter ended May 31.

    Monsanto reported earnings of $2.17 per share from continuing operations, well below the average analyst estimate of $2.40, according to Thomson Reuters I/B/E/S.

    Net sales of the company, known for its genetically engineered corn, soybean and the Roundup herbicide, declined 8.5 percent to $4.19 billion, missing estimate of $4.49 billion.

    Monsanto shares were little changed at $101.01 in premarket trading. Up to Tuesday's close, the stock had risen about 12 percent since Bayer's takeover bid was first reported on May 12.
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    Indoor farming gives former New Jersey arena new lease on life

    In an old warehouse in Newark, New Jersey, that once housed the state's biggest indoor paint ball arena, leafy green plants such as kale, arugula and watercress sprout from tall metal towers under bright lights.

    A local company named AeroFarms has built what it says is the world's largest indoor vertical farm, without the use of soil or sunlight.

    Its ambitious goal is to grow high-yielding crops via economical methods to provide locally sourced food to the community, protect the environment and ultimately even combat hunger worldwide.

    "We use about 95 percent less water to grow the plants, about 50 percent less fertilizer as nutrients and zero pesticides, herbicide, fungicides," said David Rosenberg, co-founder and chief executive officer of AeroFarms. "We're helping create jobs as well as create a good story to inspire the community and inspire other businesses."

    Inside the 30,000 square feet (2,800 square meter) warehouse, farmers tend the short-stemmed plants, which are illuminated by rows of light emitting diode, or LED, lamps and planted in white fabric made from recycled water bottles.

    The levels of light, temperature and nutrients reaching the plants in the 5-foot (1.5 meter) wide, 80-foot (24 meter) tall columns are controlled using what AeroFarms describes as a patented growing algorithm.

    Co-founder and Chief Marketing Officer Marc Oshima said that by producing indoors, AeroFarms can grow plants within 12 to 16 days, compared with 30 to 45 days outdoors. A year-round grow cycle protected from the changeable climate means that indoor farms can be 75 times more productive, he said.

    The company plans to move its operation this year to a new facility in Newark with 70,000 square feet (6,503 square meters)of growing space.

    Most green, leafy plants thrive during the spring and fall in sunnier states such as California and Arizona. Setting up indoor farms in New Jersey eliminates the environmental costs of transporting those crops to consumers in the Northeast.

    Oshima declined to say how much the Newark operation produces, but said the firm hopes to develop 25 more farms, in the United States and abroad, over the next five years.

    Asked if customers would prefer the fruits of indoor farming over organic produce, he said other concerns prevail.

    "The No. 1 trend at retail and what the consumer is looking for is local, so here we're able to bring the farm where the consumer is all year round," Oshima said.

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    Belarus to sell India potash at lowest price in a decade

    Belarus has agreed to sell potash to India at the lowest price in a decade and about a third less than last year's level as global supplies of the crop nutrient exceed demand.

    One of India's biggest fertiliser importers, Indian Potash Limited (IPL), has agreed to buy 700,00 tonnes of potash at $227 per tonne on a cost and freight (CFR) basis with a credit period of 180 days, Belarusian Potash Company, Belarus's state-controlled trader of this fertiliser, said in a statement on Monday.

    India and China, the world's biggest fertiliser consumers, usually sign contracts earlier in the year. This year, deals were delayed as high stocks held by farmers meant there was no rush to agree a deal.

    India's deal is a rare instance of the country signing a potash supply contract with a major producer before China.

    The Indian buyers confirmed the contract signing. The price is sharply down from last year's price of $332.

    "After lengthy negotiation Belarus has agreed to supply potash at $227," one of the Indian buyers told Reuters.

    IPL said it would pass on part of the benefits from lower import prices to farmers by slashing the retail price of potash by 4,000 rupees per tonne ($59).

    The contract price is fair and reflects the current conditions in the global potash market, Elena Kudryavets, director general of Belarusian Potash Company (BPC), said in a statement.

    "The contract reflects interests of producers, importers and consumers of potash fertilisers," she added.

    Belarus' contract price is likely to become the benchmark for other suppliers to India, such as the powerful North American trading group Canpotex Ltd, owned by Potash Corp of Saskatchewan, Mosaic Co and Agrium Inc.

    "Since one supplier has agreed on the price, others have to follow. Uralkali is likely to be next to sign the deal, followed by Canpotex," said a senior official at a leading Indian fertiliser company.

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    K+S Q2 profit slumps on lower potash prices

    German potash and salt miner K+S said operating profit in the second quarter plunged to 10 million euros ($11 million) from 179 million euros a year earlier on lower potash prices, sending its shares down 10 percent.

    K+S, which last year rejected a takeover approach from Canadian rival Potash Corp, had said last month that operating profit would fall significantly this year.

    Average selling prices of potash products so far over the quarter to June 30 have been "significantly lower", it warned in an unscheduled earnings statement based on preliminary results on Monday.

    K+S shares, which were already down about 5 percent before the announcement, extended losses to trade 10.3 percent lower at 18.96 euros by 1154 GMT - less than half the 41 euros per share that Potash Corp had offered.

    Potash prices are at their weakest in nearly a decade. A surplus of mining capacity, and weak currencies in consuming countries like Brazil, have extended the industry's slump.

    K+S also cited North American users of de-icing salt holding back on pre-season purchases because of high inventory levels, and high production outages due to a limited provisionary permit for waste water disposal in Germany as a contributing factor.

    A regional environmental regulator last year gave only provisional approval for the disposal of waste water via deep-well injection into porous layers of rock and imposed strict limits.

    This has resulted in a production shortfall of more than 400,000 tonnes so far, which the mining group will likely not be able to make up for at a later stage.

    "Supply shortages cannot be ruled out within the following months," it added.
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    Glyphosate decision kicked 'upstairs'

    Commission to decide

    EU health commissioner Vytenis Andriukaitis said the commission would meet on Monday (27 June) to discuss the next steps. The commission is expected to push through the temporary relicensing of glyphosate.

    EU farmers’ umbrella group Copa-Cogeca, which represents 23 million EU farmers and 22,000 agri-cooperatives, said it “regretted” that the appeal committee failed to give an opinion on the relicensing of glyphosate and it urged the commission to reapprove the product before 30 June.

    Copa-Cogeca secretary-general Pekka Pesonen highlighted the many environmental benefits of using glyphosate.

    “Farmers have been using for example no till – a sustainable agricultural practice – and it’s with the use of glyphosate that they can do this in a cost effective manner to ensure soils are in good condition.

    “It is an important tool together with catch crops to prevent soil erosion and reduce greenhouse gas emissions. Without glyphosate, farmers’ competitiveness would be put at risk and EU food production threatened as no alternatives exist.”

    The European Crop Protection Association said: “Failure to re-approve glyphosate would have significant negative repercussions for the competitiveness of European agriculture, the environment, and the ability of farmers to produce safe and affordable food.”

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    Precious Metals

    London gold trade agrees reforms to boost transparency

    The London Bullion Market Association (LBMA) has taken steps to help to preserve London's role as a major global gold trading center by making its management more open and independent, documents seen by Reuters showed.

    London currently dominates the global over-the-counter gold trade but is facing increasing competition from China. There are also more regulatory demands after scandals over attempts to rig interest rate and currency benchmarks. Several banks have run into trouble with regulators over misdemeanors in their precious metals trading business.

    Greater regulatory scrutiny has already forced changes in how precious metals prices are set but more are expected to increase transparency of the London market, which can trace its roots as far back as the seventeenth century.

    The pressure for change is increasing also because China, the metal's largest consumer and producer, is competing with London to increase market share as a price setter with a yuan-denominated gold benchmark.

    Currently, the LBMA has a management committee made up of representatives from eight firms including six banks, which are also involved in the trading of bullion.

    But a majority of members, including banks, refiners and dealers, voted on Wednesday to create an independent board of directors comprising two bank market makers and three LBMA members.

    The LBMA's chief executive Ruth Crowell and two employees of the association would also be on the board.

    "The new structure is congruent with new market conditions, so we will now have an independence and oversight governance that is needed," Sharps Pixley CEO Ross Norman told Reuters.

    "The LBMA don't hide from the notion that the decision-making process currently can sometimes be slower than they would like and with a new board in place they will be able to push through and make quicker, better decisions," Norman said.

    Bullion dealer Sharps Pixley is an ordinary member of the LBMA.

    The need to make the $5 trillion a year over-the-counter market more transparent, profitable and liquid led the LBMA to formally ask exchanges and technology firms in October last year to bid for services such as a gold exchange or a clearing platform.

    A decision on the winning bidder should be known in September.

    The LBMA is the owner of the intellectual property of the gold and silver benchmarks, run by part of the Intercontinental Exchange and a CME/Thomson Reuters joint venture respectively. The LBMA will also take on ownership of platinum and palladium benchmarks, run by the London Metal Exchange.

    The benchmarks are widely used by producers, consumers and investors to trade and value the metal. Gold and silver are among the eight major market benchmarks that are regulated by Britain's watchdog Financial Conduct Authority 
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    Privatisation of Russia's Alrosa planned for July - RIA cites Sberbank CIB

    Russian diamond miner Alrosa's privatisation is planned for July, RIA news agency quoted Russian investment bank Sberbank CIB, which is organising the deal, as saying.

    According to RIA, Sberbank CIB also said Brexit could theoretically influence the timing of Alrosa's privatisation if the situation on markets worsened.

    The Russian government aims to get more than 60 billion roubles ($928.98 million) from selling a 10.9 percent stake in Alrosa.
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    Evolution doubles dividend payout, provides three-year production guidance

    Australia’s second-largest gold producer, Evolution Mining, on Tuesday announced that it would double its dividend payout on a strong long-term outlook. From the end of the 2016 financial year, the payout rate would double to 4% of revenue, which the company said compared well with mid-tier miners’ payout rate. 

    The company, which owns and operates seven gold mines in Queensland, New South Wales and Western Australia, also outlined a three-year production plan, which showed an upward trajectory for production and a downward trajectory for costs. 

    Evolution said it expected its 2016 financial year production to hit the 800 000-oz mark – in line with its guidance – at a a C1 unit cost of A$740/oz and an all-in sustaining cost (Asic) of A$1 000/oz. The 2016 production would generate about A$405-million in net cash flow after sustaining and major capital expenditure, reported Evolution executive chairperson Jake Klein. 

    Evolution forecast group production of 800 000 oz to 860 000 oz in the 2017 financial year, with C1 cash costs estimated to be between A$685/oz and A$745/oz and Asic between A$985/oz and A$1045/oz. Sustaining capital expenditure would be in the range of A$90-million to A$120-million in the 2017 financial year, with the majority of the expenditure related to resource definition drilling and tailings facilities. 

    The Cowal mine, located on the traditional lands of the Wiradjuri People in New South Wales, would receive the largest proportion of the sustaining capital expenditure. Evolution would spend between A$110-million and A$140-million on major capital investments and would spend between A$25-million and A$30-million on exploration expenditure.

    “Evolution is now firmly in the lowest cost quartile of global gold producers. With production expected to increase in the 2017 financial year, we are looking forward to an even better year ahead,” Klein said. 

    The company maintained its production outlook for the 2018 financial year in the 800 000 oz to 860 000 oz range, but its Asic was forecast to decrease to between A$990/oz and A$930/oz. Production could increase to 870 000 oz in the 2019 financial year (800 000 oz minimum guidance), while Asic would further decrease to between A$980/oz and A$910/oz.
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    Russia-focused Nord Gold may consider Toronto listing after Brexit

    Russia-focused gold producer Nord Gold may consider a primary listing in Toronto instead of London after Britain's decision to leave the European Union, its Chief Executive Nikolai Zelenski said on Friday.

    Nord Gold, controlled by Russian steel tycoon Alexei Mordashov, is based in the Netherlands but said in January that it hopes to change its jurisdiction to Britain by the end of 2016 as a step toward a premium listing on the London Stock Exchange.

    Zelenski said Britons' vote on Thursday to leave the EU, or Brexit, may be a reason not to list in London but said it was too early to tell.

    "London may start to fade as a financial centre after Britain leaves the EU. However, it has never been the centre for global gold producers," he said in an emailed comment.

    "Therefore, Brexit may become a reason to explore alternative places for the placement. For example, the Toronto Stock Exchange is a centre for the mining industry," he added. "Brexit is an opaque and unprecedented case, it is necessary to study the legal nuances."

    Bloomberg news agency reported similar comments by Zelenski earlier on Friday.

    Nord Gold is a mid-sized gold producer with assets in Russia, Kazakhstan, Burkina Faso and Guinea.
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    Base Metals

    Newmont Mining to Sell Indonesian Mine for $1.3 Billion

    U.S. gold producer Newmont Mining Corp. said Thursday that it would sell its 48.5% economic interest in the operator of the Batu Hijau copper and gold mine in Indonesia to local company PT Amman Mineral Internasional for $1.3 billion.

    The announcement came as Indonesian-listed oil and gas company PT Medco Energi Internasional Tbk said it had acquired a controlling stake in PT Amman for $2.6 billion.

    A group of Indonesian investors led by Medco had earlier expressed interest in purchasing as much as 76% of the mine operator, PT Newmont Nusa Tenggara. Medco said Thursday that it would join forces with an investment firm led by banker Agus Projosasmito and receive funding for the purchase from Indonesia’s three largest state-owned banks.

    Japan’s Sumitomo Corp., Newmont’s partner in Newmont Nusa Tenggara, has also agreed to sell its ownership stake to PT Amman.

    Newmont said the sale of its stake at “fair value aligned with its strategic priorities to lower debt, fund highest margin projects and create value for shareholders.”

    “Our goal is to build a portfolio of long-life, low-cost assets with the technical, social and political risks we are well-equipped to manage,” Newmont Chief Executive Gary Goldberg said in a conference call to discuss the transaction, noting that earlier divestments have lowered risk.

    The sale will involve a closing payment of $920 million and contingent payments of up to $403 million, Newmont said. Globally, Newmont has gained $1.9 billion from sales of noncore assets since 2013.

    The latest deal, which is expected to close in the third quarter, comes as miners world-wide are re-evaluating their assets, having been hit by a slump in commodities prices. In early June, mining giant BHP Billiton Ltd. agreed to sell its 75% interest in Indonesia’s IndoMet Coal to local producer PT Alam Tri Abadi, in a move to pursue other growth options that BHP said were more attractive for future investment.

    Colorado-based Newmont and Sumitomo operate the Batu Hijau copper and gold mine on the island of Sumbawa in Western Indonesia.

    The company said its debt burden would “improve significantly” without Batu Hijau.
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    Q1 Escondida copper production falls 23% year on year

    Production at the world's largest copper mine, Escondida in northern Chile, fell 23% year on year in the first three months of the year to 265,597 mt, the BHP Billiton-controlled operation said Wednesday.

    The mine said a 10% year-on-year rise in production of copper cathode to 84,778 mt was unable to offset a 33% drop in concentrates production to 180,819 mt.

    Mine revenues fell 33% to $1.374 billion, largely due to the fall in copper prices, while profits fell 47% to $265 million.

    The mine is 57.5% owned by BHP Billiton, Rio Tinto owns a 30% stake while the balance of shares is held by two Japanese consortia.
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    RTZ gives 53.8% of BCL to PNG/ABG. Stunning!

     Bougainville Copper Limited shareholding30 June 2016Rio Tinto has today transferred its 53.8 per cent shareholding in Bougainville Copper Limited (BCL) to anindependent trustee.Equity Trustees Limited will manage the distribution of these shares between the AutonomousBougainville Government (ABG) for the benefit of all the Panguna landowners and the people ofBougainville, and the Independent State of Papua New Guinea (PNG).Under the trust deed, the ABG has the opportunity to receive 68 per cent of Rio Tinto’s shareholding(which equates to 36.4 per cent of BCL’s shares) from the independent trustee for no consideration andPNG is entitled to the remaining 32 per cent (which equates to 17.4 per cent of BCL’s shares).The ABG and PNG will both hold an equal share in BCL of 36.4 per cent if the transfers are completed.This ensures both parties are equally involved in any consideration and decision-making around thefuture of the Panguna mine.Rio Tinto Copper & Coal chief executive Chris Salisbury said “Our review looked at a broad range ofoptions and by distributing our shares in this way we aim to provide landowners, those closest to themine, and all the people of Bougainville a greater say in the future of Panguna. The ultimate distribution ofour shares also provides a platform for the ABG and PNG Government to work together on future optionsfor the resource.”In accordance with the existing management agreement with BCL, Rio Tinto will today give the requiredsix months’ notice to terminate the arrangement. Although Rio Tinto will no longer hold any interest inBCL, Rio Tinto will continue to meet its obligations under the agreement during that period to ensure anorderly transition in the shareholdings of the company. BCL chairman Peter Taylor will resign withimmediate effect but he will continue to be available to provide services to the board during this transitionperiod.Note to editorsThe Trust Deed determines that should either beneficiary of the trust not apply for the transfer of the BCLshares attributable to them from the trustee within two months, then those shares will be made available to the other party.
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    Alcoa, 3D printing, and the Angel of the North.

    Metals company Alcoa Inc said on Wednesday that its planned split will consist of a spinoff of its traditional upstream smelting business, and that up to 19.9 percent of the new company will be owned by its value-added business that serves the aerospace and automotive industries.

    The company to be spun off will be named Alcoa Corp and the value-added business Arconic Inc, Alcoa said in a regulatory filing. The split is due to take place in the second half of this year.

    The spinoff comes at a time when aluminum prices have hovered around historic lows. Many producers have accused China of selling metal into oversupplied global markets below market rates. China denies this and says excess capacity is a global issue.

    Amid that downturn, Alcoa has been reducing its refining and smelting capacity and has focused on more advanced aerospace and automotive products.

    In recent months the company has announced deals to provide a light but tough aluminum alloy for Ford Motor Co's (F.N) high-selling F-150 pickup and aerospace contracts including titanium seat track assemblies for Boeing Co's.

    Australia's Alumina Ltd has raised concerns over the impact of Alcoa's planned split on the pair's bauxite and alumina production joint venture, Alcoa Worldwide Alumina and Chemicals.

    In May, Alcoa filed a lawsuit seeking a declaration that Alumina has no right to block the plan.

    In 2015, Alcoa's traditional upstream business had pro forma revenue of $11.2 billion, while its value-added business had revenue of $12.5 billion, the company said.

    As part of the split, the new upstream business will have around $236 million in outstanding long-term debt. The new company will raise approximately $1 billion in new debt and provide for up to $1.5 billion in funding through a revolving credit facility.

    Alcoa's total debt in the first quarter was around $9 billion, so the lion's share will remain with Arconic, the larger of the two companies post-split.

    On a conference call with analysts, Alcoa Chief Executive Klaus Kleinfeld said the pension obligations of the new upstream business as of the end of 2015 will be around $2.6 billion, while the value-added business Arconic will have pension obligations of around $3 billion.

    The company reiterated that Arconic will be an investment-grade entity, while the new Alcoa will be a "strong non-investment grade" firm.

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    China aluminium makers boost output, risking new trade tensions

    China aluminium makers boost output, risking new trade tensions

    After signs China was curbing aluminium output late last year, the world's biggest producer is gradually increasing output again, raising the risk of fresh tensions with global trading partners from any spike in exports.

    The production restarts and new capacity come as local prices and demand rise, and are earlier than some experts expected. Chinese production and exports of semi-finished products (semis) hit six-month highs in May, after decade-low prices had caused widespread curtailments in December.

    China has been accused by competitors of selling metal into oversupplied global markets below market rates.

    China denies this and says excess capacity is a global issue, but analysts say tensions could be partly alleviated by selling more finished products such as smartphone cases.

    China Hongqiao Group Limited, the world's top aluminium producer, is on track to expand its production capacity by 1 million tonnes to around 6.2 million tonnes this year, head of investor relations Xiao Xiao said.

    "We are not expecting the price to pick up quickly, but at least this year we have seen very strong demand," she said.

    ShFE aluminium prices have rebounded by nearly a third to 12,400 yuan from record lows in November.

    Xiao pegged Chinese aluminium demand growth at 7 percent, with more than 10 percent gains from packaging, and strong orders from consumer electronics and aerospace.

    "The majority of the products will be consumed in the domestic market, but the international market is a key target market for Chinese aluminium semis," CRU analyst Wan Ling said.

    China Hongqiao does not directly export, but supplies local fabricators that serve domestic and international markets. Its production jumped by 36.8 percent to 4.4 million tonnes in 2015, while production capacity reached 5.186 million tonnes. [ ]

    Medium term, CRU expects China's exports of value-added aluminium products to hit more than 8 million tonnes by 2020 from around 6 million this year, partly as firms sell more to countries along the former silk road.

    Exporting more finished products may help China steer through global trade tensions.

    The U.S. International Trade Commission has launched an investigation into the global aluminium trade after campaigns from producers such as Century Aluminum Co, which is majority-owned by Glencore PLC.

    Beijing-based consultancy AZ China sees 3 million tonnes of new Chinese aluminium capacity opening this year, of which one third is already on line, with more to come next year.

    "If they can't ship semis because of WTO intervention, before long they will be selling more finished aluminium goods," managing director Paul Adkins said.

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    Workers to vote on strike at Chile's El Soldado copper mine

    Workers at the El Soldado copper mine in central Chile have called for a ballot on a strike after pay talks ended without agreement.

    In a statement Friday, the Copper Workers Federation said the last offer from management included no pay increase.

    The workers "have been preparing for this outcome for some time and expect an improved offer" if a strike was to be avoided, the federation said.

    In 2015, the mine produced 35,840 mt of copper in cathode and concentrates.

    Anglo American has put its 50.1% stake in the mine up for sale. State-owned Chilean copper company Codelco plus Mitsui and Mitsubishi of Japan own the balance of the shares.
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    A new threat to China's nickel pig iron producers?

    What sort of threat does the election of a new government in the Philippines pose to China's nickel pig iron (NPI) sector?

    Incoming President Rodrigo Duterte has already fired several warning shots at the country's mining sector, calling on local operators to "shape up" and stop "the spoiling of the land".

    His actions speak as loud as his words. He has just appointed a committed environmentalist, Gina Lopez, as Secretary of the Department of Environment and Natural Resources, a position with broad oversight of the mining sector.

    The Philippines produces a wide range of minerals but the immediate focus is on the huge amounts of nickel ore it ships every month to Chinese producers of nickel pig iron (NPI).

    China's NPI sector, an integral part of the country's stainless steel supply chain, has become increasingly dependent on Philippine ore since 2014, when its previous main supplier, Indonesia, banned all exports of unprocessed minerals.

    Since nickel ore is largely produced by open pit mining, likely to be specifically targeted by the new Philippine administration, there is a ripple of bullish expectation running through the nickel market.

    China's NPI sector was already supposed to have imploded by now, crushed by the loss of Indonesian ore and increased production costs associated with treating lower-grade material from the Philippines.

    The fact that it hasn't says much about the resilience of Chinese NPI producers.

    And as long as they continue operating, other nickel producers will be tempted to hang on in there rather than curtail output, limiting the potential for a sustained rebound from current low prices.

    China's imports of Indonesian nickel ore collapsed almost immediately after the ban on exports of unprocessed ore came into effect at the start of 2014.

    Imports plummeted from 41 million tonnes in 2013 to 10.6 million tonnes in 2014 and to just 174,000 tonnes in 2015. The latter may have been no more than a misclassification of iron ore with relatively high nickel by-product content.

    Philippine ore producers stepped up their production and exports in response. Chinese imports accelerated from 29.7 million tonnes in 2013 to 36.4 million tonnes in 2014 and largely held steady last year.

    The scale of that response surprised just about everyone in the nickel market and was probably the single biggest factor in halting the post-Indonesia price rally that saw the London three-month price peak at over $20,000 per tonne in the middle of 2014.

    Chinese imports from the Philippines are running lower this year, even allowing for the "normal" seasonal impact of the rainy season on output and shipping (see graphic above).

    The reason is the current low price environment rather than the environment.

    The Philippines Nickel Miners Association warned in March its members planned to reduce output by as much as 20 percent this year as prices slid to 13-year lows of $7,550 per tonne in February.

    National output of mined nickel slumped 38 percent year-on-year to 75,300 tonnes in the January-April period, according to the International Nickel Study Group. Chinese imports of Philippine ore were down by 27 percent in the first five months of the year.

    No alternative supplier has so far emerged to pick up the renewed supply slack, although one renewed appearance in China's nickel import profile is worth noting.

    Imports of ore from New Caledonia have restarted after a gap of three years. This is a displacement effect resulting from the well-publicised troubles of Clive Palmer's Queensland Nickel, a major buyer of New Caledonian material.

    The Australian plant is currently shuttered and New Caledonia has exempted two local nickel producers from a long-standing ban on exports of China, albeit with a maximum ceiling of 700,000 tonnes.

    China imported 113,200 tonnes of ore from New Caledonia over the February-May period, a trickle by comparison with the Philippines but one which may gather pace in the coming months.

    All of which begs the question as to how China's NPI sector is still operating at all with no Indonesian ore, reduced flows of Philippine ore and only marginal offset from new suppliers.

    But not only is it doing so, all the indications are that the worst of any contraction may be over.

    Analysts at the Beijing office of research house CRU expect national production rates to hit 300,000 tonnes this year after sliding from a peak of over 500,000 tonnes in 2013.

    But they are then expected to "stabilise and increase again in 2017."

    CRU estimates, for example, that China's NPI production costs have fallen by a staggering 25 percent since the start of last year and that margins were still positive up until the start of this year.

    Imports of such Indonesian material, higher purity than ore but lower purity than ferronickel, totalled 256,000 tonnes in the first five months of 2016.

    Tsingshan has just started up a stainless steel plant in Indonesia, which may serve to reduce NPI shipments to China but which should serve as a warning of how Chinese stainless producers are integrating NPI flows into their core operations.

    And despite all the rhetoric from the Philippines' new administration about cleaning up mining and potentially following Indonesia in its resource nationalist policies, any wholesale change in the country's mining law could still be years away.
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    Alumina files counter-claim against Alcoa

    Australian company Alumina has filed a counterclaim against US group Alcoa, which last month turned to a Delaware court to prevent its partner in Alcoa Worldwide Alumina and Chemicals (AWAC) from blocking a demerger plan. Alumina said on Monday that its counterclaim sought court declarations to prevent Alcoa from taking further steps in its separation plan, announced in September, without complying with certain obligations under the AWAC agreements. 

    The counterclaim also sought to stop the US group from receiving offers to acquire its interest in the various AWAC companies, citing Alumina’s ‘first option rights’. Alcoa's demerger plan would separate the company's aeroplane and aviation parts business under the name Arconic, while the traditional aluminium smelting operations, including the 60% stake in AWAC, would retain the Alcoa name. 

    Alumina stated that, under Alcoa’s planned separation, the US group would exit AWAC and would substitute a new unaffiliated legal entity to hold its existing interests in the JV. Alumina believed Aloca had to obtain its consent to assign its rights and obligations to a new legal entity. 

    “The AWAC joint venture agreements have governed our relationship with Alcoa for over 20 years. We consider that Alcoa’s plan to substitute a new entity into the joint venture without our consent is a clear breach of these fundamental agreements. “We understand how important the resolution of this matter is for Alcoa’s separation and have tried to negotiate with Alcoa to reach an agreement that is commercially acceptable for both parties. 

    Alcoa has chosen instead to bring this matter before the courts,” commented Alumina CEO Peter Wasow. AWAC has two bauxite mines and three refineries in Western Australia, as well as two smelters in Victoria. A trial date has been set for September 20.
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    Anglo American advancing in wage talks at Chile copper mines

    Global mining company Anglo American said on Friday that it is progressing with wage negotiations at its flagship Los Bronces copper mine, in Chile, and is looking to finalise talks with workers at other operations in the country. 

    This year, Anglo American needs to negotiate contracts with seven unions in Chile amid low prices for the red metal. 

    "We're conversing within an early (wage negotiation) process with the two unions at our Los Bronces operation whose contracts expire at the end of August this year," a company spokesperson said. "Agreements have already been reached and signed with the supervisors' union and with the two unions at the Chagres (smelter)," the spokesman added. 

    Los Bronces produced 401 715 t of copper last year. Anglo American is also in negotiations with workers at the smaller El Soldado mine, where workers said on Friday that they would vote on a strike next week after receiving an offer from the company that they deem insufficient. El Soldado produced 35 840 t of the red metal in 2015.
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    Steel, Iron Ore and Coal

    BHP says will fight $6 billion claim over Samarco disaster

    BHP Billiton on Friday said it would appeal against the decision by a Brazilian court to reinstate a $6 billion public civil claim over last year's Samarco iron ore mine disaster.

    BHP and 50-50 joint-venture partner Vale had agreed on a $2.3 billion settlement in March, but Brazil's Superior Court has responded to an appeal from the Federal Prosecutor's Office by issuing an interim order suspending its ratification.

    That decision reinstates a 20 billion real ($6.23 billion)public civil claim for clean-up costs and damages against Samarco, Vale and BHP.

    "BHP Billiton Brasil intends to appeal the decision of the Superior Court of Justice," BHP said in a statement.

    In the meantime, Samarco will continue to support the long-term recovery of the communities and environment affected by the dam failure, the company said.

    A burst tailings dam at the mine on Nov. 5 unleashed a mud flow that killed 19 people, left hundreds homeless and polluted a major river. The government called it the country's worst ever environmental disaster.

    The mine has been closed since. Environmental authorities say it will only be allowed to reopen when it can prove mud is no longer leaking into the surrounding area and that the mine can be run safely.
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    Vietnam says Formosa unit's steel plant caused environmental disaster

    Vietnam said on Thursday a $10.6 billion steel plant run by a unit of Taiwan's Formosa Plastics caused an until-now mysterious environmental crisis by releasing toxic wastewater into the sea.

    Formosa Ha Tinh Steel, which operates a new plant set to become the biggest of its kind in Southeast Asia, on Tuesday admitted responsibility for a disaster that caused massive fish deaths in coastal provinces in April, said Mai Tien Dung, head of the government office.

    The spill sparked public outrage across Vietnam and three successive weekends of protests, with demonstrators venting their fury at both Formosa and the government, accusing them of a cover-up.

    Formosa had apologized and would provide $500 million in compensation for those affected, Dung said.

    "Violations in the construction and testing operations of the plant are the causes for serious environment pollution killing a massive amount of fish," Dung told a packed news conference.

    "Formosa has admitted responsibility for the fish deaths in four central provinces and committed to publicly apologize for causing severe environmental incidents."

    The plant is one of the single biggest investments by a foreign firm in Vietnam.

    Media reports in April said chemicals from a drainage pipe killed the fish, but a preliminary investigation by Formosa and separately by the government said there were no direct links between the steel plant and the fish deaths.

    The initial government probe concluded the cause was either toxic discharge caused by humans or "red tide", when algae blooming at an abnormal rate produce toxins.

    The incident created a crisis for a new government led by Prime Minister Nguyen Xuan Phuc, which took office within days of when dead fish started washing up on beaches on April 6, impacting 200 km (124 miles) of coastline.

    The first protests in several cities were initially tolerated by the authorities, but later rallies were broken up by police, who were accused by rights groups of using heavy-handed measures to stifle free speech.

    Protests also took place in the days ahead of a landmark visit by U.S. President Barack Obama. A petition posted on the White House website demanding a transparent probe received 140,000 signatures.

    Vietnam said the rallies were orchestrated by "reactionary forces" bent on trying to bring down the government.

    In a video clip played at Thursday's news conference, Tran Nguyen Thanh, the chairman of Formosa Ha Tinh Steel, expressed regret over the incident.

    "We deeply hope the Vietnam people can forgive us," he said.

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    Indian Apr-May coal imports down 5pct

    Indian coal imports declined by 4.9% to 35.85 million tonnes in April-May due to increased production by Coal India (CIL), Coal Secretary Anil Swarup said on June 30.

    Swarup said that reduction in coal imports resulted in saving of "Rs 4,285 crore ($634.2 million) during April-May 2016 by way of foreign exchange".

    Last week Swarup had said that coal imports will come down further in the ongoing fiscal on account of increased domestic output.

    In Fiscal 2015-16 ending on March 31 2016, CIL achieved a record production of 536 million tonnes, growing 8.5% year on year. The output target is fixed at 598 million tonnes for this fiscal.
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    China's coal output declines 8.4 pct

    China's coal output fell 8.4 percent year on year to 1.34 billion tonnes during the first five months of the year, the top economic planning body said Wednesday.

    Coal imports rose 3.7 percent from one year earlier to 86.28 million tonnes during the five-month period, according to a statement on the website of the National Development and Reform Commission.

    Exports more than doubled to 4.01 million tonnes.

    Coal storage in major power plants totaled 54.32 million tonnes.

    The statement added that stockpiles at coal companies amounted to 120 million tonnes at the end of May, down 9.2 percent year on year.
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    Rio Tinto reduces exposure in tax havens, paid $4.5bn in taxes last year

    Diversified mining group Rio Tinto has reduced its exposure to tax havens, with only 17 of its more than 600 controlled entities currently resident in countries with a with a general income tax rate of 10% of less. Eight of the 17 entities were dormant and either in liquidation or scheduled for liquidation, 

    Rio Tinto reported on Wednesday in its ‘Taxes paid in 2015’ report, which showed that the mining company had paid $4.5-billion in taxes and royalties last year. 

    Of the remaining nine entities, four were established as investment holding companies to hold shares in operating companies prior to becoming part of the Rio Tinto group through acquisition. The company did not obtain tax benefits from these entities, but said that liquidating them would incur unnecessary costs. 

    Three entities provided interest-free loan funding to the group operating companies, while one entity held investments for the benefit of a community in a region of a mine, which had ceased to operate. One entity was established to provide in-country services prior to becoming part of the Rio Tinto group through an acquisition. This business had been reduced so that it had only $1-million turnover and about $50 000 profit. 

    CFO Chris Lynch used the 2015 tax report to explain how the group’s tax strategy applied to entities resident in tax haven jurisdictions. This followed increased public and media interest in the use of entities resident in tax havens in recent years, after Rio Tinto and BHP Billiton have been accused of avoiding taxes in Australia. 

    Rio Tinto also provided details about its operations in Singapore, where the general corporate income tax rate was 17%, but the company qualified through significant business activity for a lower tax rate. The mining group stated that it had a “small number” of Singapore resident companies, which essentially paid an effective corporate income tax rate of 10% or less, owing to the incentive scheme. 

    The transactions with the Singaporean entities were undertaken on an arm’s length basis and were priced in accordance with Organisation for Economic Cooperation and Development (OECD) guidelines and local legal requirements. “While we are satisfied these transactions align with tax requirements, differences of interpretation between companies and tax authorities can occur. In order to reduce the risk of dispute, we enter into Advance Pricing Agreements (APAs), which operate to agree the price charged with tax authorities. 

    We have entered into APAs with the Australian Tax Office (ATO), Canada Revenue Authority and Singapore Revenue Authority in relation to some of the transactions involving the Singapore commercial centre.” Rio Tinto said it was engaged in discussions with the ATO in relation to the pricing of iron-ore marketing services.

    Lynch said that 2015 had been a year of significant change in the international tax landscape, as a result of the OECD’s project on Base Erosion and Profit Shifting (BEPS).  He said that Rio Tinto agreed with the primary aims of BEPS, which were to prevent aggressive tax avoidance and to update tax rules on a consistent basis to cater for modern, globalised business structures. “We have engaged constructively with the OECD BEPS process.

    We accept the recommendation to share country by country reporting with tax authorities. “Care must be taken not to inadvertently damage the investment environment when implementing BEPS recommendations. We are also concerned about the potential for double taxation resulting from this initiative, and about the additional compliance costs that will result from actions being taken by governments and tax authorities in response,” said Lynch. ‘32% 

    Rio Tinto reported that the $4.5-billion it had paid in taxes and royalties last year was a 32% decrease on that of 2014, owing to lower underlying earnings. Of the total, Rio Tinto paid $3.3-billion in taxes in Australia.
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    India allows flexibility in utilization of coal

    In order to reduce the cost of electricity generation the Indian government has allowed the power utilities of the central government and state governments to have flexibility in utilization of coal by swapping coal supplies.

    Early this month, the Central Electricity Authority (CEA) issued the methodology for swapping coal linkages for efficient usage and reduction in transportation charges.

    Under this, coal linkages from state-run Coal India Limited and Singareni Collieries Company Limited will get transferred from inefficient power stations to efficient ones and from plants situated away from coal mines to pitheads to reduce the coal transportation cost, according to CEA guidelines.

    At present, there are several power plants running at a very low plant load factor but the coal linkages allotted to them remain the same while some of the very efficient plants are facing a severe shortage of coal, a CEA official said.

    The new scheme will help end this anomaly along with bringing down the cost of power.

    He added that once the scheme is successfully implemented by government-owned utilities, it will be extended to the private sector as well.

    The methodology for transferring or swapping of coal linkages with private power plants will be drawn out soon and there is a possibility of imported coal-based plants being included in the scheme, the CEA official said.
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    Iron Road: Chinese back South Australia over its iron ore rivals

    Asia's largest infrastructure contractor, China Railway Group, backs South Australia's Eyre Peninsula as preferred location ahead of WA, Eastern Canada or West Africa for a large-scale iron concentrate development.

    Developer Iron Road says CREC senior executives reiterated the view after site visits to its Central Eyre Iron Project and a week of meetings including state government leaders and stakeholders in Adelaide.

    Iron Road is cautiously optimistic of finalising CEIP project financing in 2017, allowing first iron concentrate shipments by end-2020.
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    BMI lifts thermal coal price outlook

    Fitch group research firm BMI has raised its thermal coal price forecasts on the back of a more aggressive contraction in global mine output than initially anticipated, mainly in China. 

    The firm now forecast Newcastle coal to average $53/t in 2016, up from $51/t and at $57/t in 2017, previously forecast to average $52/t. ADVERTISEMENT According to BMI, coal prices would continue forming a base over 2016. For instance, Newcastle coal prices had averaged $51/t so far this year and analysts predicted an average of $55/t over the remainder of the year, compared with the June 22 price of $56.1/t. 

    BMI expected the temporary boost to Chinese import demand from a stimulus-led uptick in economic activity to fade in the second half of the year and prevent a more substantial rebound in prices than had already been seen since the February low of $47.6/t. In the long term, 

    BMI had raised its average price forecasts for 2016 and 2017 to $53/t from $51/t previously, and to $57/t from $52/t, respectively. The key reason behind the upward revision was a more aggressive cutback in global supply than previously expected, which would drive a rebalancing of the market in 2016 and put a floor under prices, BMI advised. 

    Supply cuts were expected to be most aggressive in China and the US and severe output declines would prevent the ramp-up in coal exports from these countries that would otherwise have resulted from weak domestic demand. India and South-East Asia would be the demand bright spots. 

    In India, a large pipeline of coal-fired power-plants would see the country's imports remain vigorous, on top of aggressive domestic coal production growth. BMI expected a surge in coal demand for domestic power-plants in Indonesia, which meant that coal exports from the country had already peaked. 

    BMI noted that despite market expectations for prices having turned more positive in recent months, its upward revision placed it above consensus for 2016/2017, as gauged by Bloomberg.
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    China’s key steel mills daily output down 3.5pct in mid-Jun

    The daily crude steel output of China’s key steel mills dropped 3.54% from ten days ago to 1.68 million tonnes in mid-June, according to data released by the China Iron and Steel Association (CISA).

    China’s daily crude steel output is expected to be 2.21 million tonnes in mid-June, down 2.24% from ten days ago, CISA forecasted.

    Analysts said that crude steel output registered the second consecutive ten-day drop since June, contributing to easing supply glut in currently slack season. Yet, crude steel production may climb after the environmental checks at Tangshan ended.

    The price of Tangshan square billets rose 40 yuan/t to 1,880 yuan/t last week, which drove up prices of many steel products and encouraged the market confidence.

    Meanwhile, the restructuring of Baosteel Group and Wuhan Iron and Steel (WISCO) announced on June 24 will not only accelerate the de-capacity move of steel sector, but also propel the regrouping of steel makers. It is also expected to bring some favorable influences on China’s steel market in the long run, as the move may reduce disordered competition among enterprises.
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    Shenhua visits Japan to expand coal export market

    China’s top coal miner Shenhua Group sent a group to visit Japan recently, aiming to expanding its coal export to the country, signaling its active exploration of market opportunities in a time of slack domestic market, the group said on its website on June 23.

    The group visited Tohoku Electric Power and many other customers of Shenhua coal, promoting its integration operation, clean coal mining and using technology and some technical matters for the product. It investigated customers’ need deeply and discussed with them about the cooperation next year.

    Shenhua has resumed coal export to Japan, with first shipment of 67,480 tonnes of coal shipped to Tohoku Electric Power on December 9 last year.

    This is the first time Shenhua has resumed coal export to Janpan in the past three years, after its export to Japan peaked around 10 million tonnes annually in 2000.

    The deal was heard done on 5,800 Kcal/kg NAR coal at $65.56/t with VAT, equating to 420.5 yuan/t with VAT, FOB basis. On December 9 last year, the 5,800 Kcal/kg material was offered at 383-395 yuan/t with VAT, FOB Qinhuangdao.

    On June 6, Mitsubishi Metal Resources Commercial Trade Group visited Shenhua, aiming to deepen cooperation on coal import and export businesses.

    In the first quarter this year, China Shenhua Energy, the listed arm of Shenhua Group, exported 0.7 million tonnes coal, surging 133.3% year on year.

    China exported a total 4.01 million tonnes of coal in the first five months, up 113.9% on year.

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    Shanghai steel extends gains to seven-week top amid low China inventory

    Shanghai rebar steel futures advanced on Tuesday, touching a fresh seven-week peak and adding to sharp gains from the session before amid low inventories that pointed to firm demand.

    Shanghai rebar surged by the maximum 6 percent allowed by the exchange on Monday, following weekend news of a planned restructuring by leading Chinese steelmakers Baosteel Group and Wuhan Iron and Steel Group.

    The announcement reflects China's efforts to consolidate its massive steel sector to improve efficiency amid global calls for Beijing to address its overcapacity.

    Falling steel inventories in China also suggest firm appetite. In the week ended June 24, Chinese steel stockpiles dropped 1.4 percent from the prior week to 8.84 million tonnes, said Argonaut Securities analyst Helen Lau.

    Steel inventory has fallen for the past five weeks and the current level is 47 percent lower than a year ago, said Lau, adding that the utilization rate at China's blast furnaces is also 9 percentage points below the same period last year.

    "Against these low steel inventory and low utilization rates, there is room for steel prices to increase in our view, given that current steel prices are around 30 percent lower than the same period last year," Lau said in a note.

    The most-traded rebar on the Shanghai Futures Exchange was up 2.1 percent at 2,257 yuan ($340) a tonne by 0206 GMT. The construction steel product touched 2,286 yuan earlier, its highest since May 9.

    Benefitting from firmer steel prices, the most-active iron ore on the Dalian Commodity Exchange rose as far as 420.50 yuan per tonne, also its strongest since May 9.

    It was last up 3.6 percent at 416 yuan, adding to Monday's nearly 6-percent spike.

    But price gains in the steelmaking raw material may not last as iron ore stockpiles at China's ports stay high, traders say.

    Inventory of imported iron ore at major Chinese ports stood at 101.5 million tonnes as of June 24, the most since December 2014, according to data tracked by SteelHome consultancy.
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    China threatens WTO case over U.S. steel duties

    China could file suit at the World Trade Organization in order to protect its steel industry, the Commerce Ministry said on Tuesday, after the United States said some steel imports from China were hitting U.S. producers.

    The U.S. International Trade Commission said on Friday that imports of corrosion-resistant steel from China and four other countries were harming U.S. producers, the final step in the imposition of U.S. anti-dumping and anti-subsidy duties.

    The U.S. Commerce Department had already slapped duties of up to 450 percent on the steel products from China and duties ranging from 3 percent to 92 percent on corrosion-resistant steel from Italy, India, South Korea and Taiwan.

    The ministry said Washington's large anti-dumping and anti-subsidy duties would force Chinese companies to pull this type of steel product out of the U.S. market.

    "China's steel industry export interests will suffer a serious impact and the Chinese steel industry is strongly opposed to this," the ministry said in a statement posted to its website.

    "With regard to the United States' mistaken methods that violate WTO rules, China is and will continue to take all measures, including filing suit at the WTO, to strive for fair treatment for enterprises and safeguard their export interests," it said.

    Steel mills in China, the world's biggest producer and consumer of the metal, have raised production and beefed up exports despite the government's efforts to cut overcapacity. This has escalated trade spats between China and other steel producing nations, such as Japan, India and the United States.

    The Commerce Ministry has said that it is deeply concerned about protectionism in the U.S. steel sector. It argues that the difficulties facing the global steel sector have resulted from falling demand, and that trade protectionism from the U.S. will intensify conflicts and disputes.

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    China’s steel makers’ profit reaches 64 mln yuan over Jan-Apr, CISA

    China’s large and medium-sized steel makers turned losses into profitability, realizing a total 64 million yuan ($9.63 million) of profit over January-April, said Wang Liqun, vice president of China Iron and Steel Association (CISA), in a meeting on June 24.

    It was mainly thanks to the surging steel prices during the period, with a rise of 18% and 22% in March and April respectively, and the profit of steel products is as much as 100-1,000 yuan/t, Wang added.

    Consolidated gross profit margins of these companies increased from 3.67% in the first three months of last year to 7.39% in the first quarter of this year.

    In the first half of the year, steel production and the apparent steel consumption were on the decrease on the whole, and steel exports were climbing.

    However, there are still 32 out of these medium and large steel makers in China or 32.32% of the surveyed steel mills that are suffering losses, according to the data.

    In the first quarter, however, 36 iron and steel smelters listed on the stock markets registered revenue of 202.1 billion yuan, down 21% from the same period last year. The decrease was much lower than the 31% year-on-year decrease in the fourth quarter of 2015.

    The fast increase in steel prices is not sustainable because it depends on growing real estate construction demand. As idle capacity resumes production, supply will keep growing, but demand is unlikely to grow as fast. Therefore, iron and steel prices still face downward pressure in the near future.
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    Brazil's Usiminas says has raised 1 bln reais in capital plan

    Brazil's Usiminas said on Monday that after the second round of a capital injection plan the firm has raised 999.98 million reais ($243 million), a key step in helping the steelmaker refinance debt and fight its worst crisis in decades.
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    Monthly coal use for U.S. power falls to lowest since 1978: EIA

    Coal used to generate U.S. power fell in April to its lowest monthly level since 1978, the U.S. Energy Information Administration said in a report.

    Coal-fired power plants generated just 72.2 million megawatt hours in April, their lowest since April 1978, according to EIA data released on Friday. One megawatt is enough to power about 1,000 U.S. homes.

    Natural gas, meanwhile, surpassed coal as the United States' top fuel source for the third straight month, producing 100.0 million MWh in April, the EIA said.

    Of the total 293.3 million MWh generated in April, gas accounted for 34 percent and coal just 25 percent.

    The EIA said gas produced a record 1.362 billion MWh, or about 34 percent of the total, in the year through April 30, compared with 1.250 billion MWh, or 31 percent, for coal.

    Other major sources of power production over the year were nuclear at 20 percent, and non-hydro and solar renewables, such as wind, at 7 percent, the EIA said.

    The agency has previously forecast generators would burn more gas than coal in 2016 for the first year.

    Coal has been the primary fuel source for U.S. power plants for the last century, but its use has been declining since peaking in 2007. That was around the same time drillers started pulling gas out of shale formations.

    Ten years ago, coal produced 50 percent of the nation's power supply, while gas accounted for just 19 percent. Now both fuel about a third, according to the EIA.

    After shutting a record 17,500 MW of coal-fired power plants in 2015, energy companies said they planned to close more than 13,000 MW this year as weak gas and power pricesmake it impractical to upgrade older coal plants to meet increasingly strict federal and state environmental rules.

    Spot prices at the Henry Hub benchmark have averaged $2.03 so far this year, while futures for the balance of 2016 were fetching $2.83. That compares with $2.61 in 2015, the lowest since 1999.
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    Transnet pares back capex as commodity slump impacts demand

    State-owned freight logistics group Transnet has pared back its 2016/17 capital expenditure (capex) plan in line with its strategy of “validating” demand ahead of moving ahead with major investments. The rail, ports and pipelines utility expects to invest around R22.8-billion during the 2017 financial year, having already reduced its capex in 2016 to R29.6-billion, from a peak of R33.6-billion in 2015. 

    However, CEO Siyabonga Gama stressed at the group’s results announcement on Monday that it would still invest R340-billion to R380-billion over the coming ten years, as part of its much vaunted market demand strategy (MDS) to expand capacity ahead of demand. 

    He also underlined that Transnet had invested R124-billion since the start of the MDS in 2012, despite lower than assumed volumes and gross domestic product (GDP) growth. Nevertheless, the immediate outlook had been affected mainly by lower commodity prices, which, in turn, had led to a deferment of a number of planned investments, particularly in relation to coal and iron-ore. 

    CFO Garry Pita said that R12.1-billion of iron-ore-related capex had been deferred to the outer years of the MDS, owing to lower validated demand from the sector, while Gama indicated that two major coal-related investments would materialise later than initially anticipated. 

    The plan to open up the coal export line to the Waterberg coalfields was now only expected to materialise in 2021/22, while the trigger had not yet been pulled on the Swazi Rail Link – a proposal to invest in a new line through Swaziland in an effort to liberate additional capacity on the Richards Bay corridor for additional coal exports. 

    Transnet expects coal volumes to recover modestly in the current financial year to 75-million tons from 72.1-million tons, but to remain below the 76.3-million railed in 2015. The 2012 MDS, meanwhile, had assumed that coal volumes would have been climbed to 84-million tons in 2016/17. Likewise, iron-ore volumes were expected to fall well short of the 70-million tons assumed for 2016/17, having slumped 3% in 2015/16 to 58-million tons. 

    Gama indicated that the group’s immediate focus was on capturing greater general-fright market share from road, while diversifying away from its current reliance on mined commodities.
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    China to cut coal capacity by 280 mln T this year: state planner

    China plans to cut coal output capacity by 280 million tonnes and lower steel production capacity by 45 million tonnes this year, the head of the country’s top economic planner said on June 26 during Davos World Economic Forum in the northern city of Tianjin.

    The capacity cuts would involve relocating 700,000 workers in the coal sector and 180,000 workers in the steel industry, said Xu Shaoshi, chairman of the National Development and Reform Commission.

    Xu was “very confident” that China would achieve the 2016 targets.

    The government has vowed to tackle price-sapping supply gluts in major industrial sectors and said in February that it would close between 50-100 million tonnes of steel capacity and 500 million tonnes of coal production within three to five years.

    The government plans to allocate 100 billion yuan ($15.2 billion) to help local authorities and state-owned firms finance layoffs in the two sectors this year and in 2017, with 20% of the total used to reward high achievers.

    Layoffs from the two sectors are expected to total 1.8 million workers, according to official estimates.

    Xu said China’s overall leverage levels were under control and the government may roll out policy steps to “actively and steadily” reduce corporate debt levels.

    The government would forge ahead with supply-side reforms while appropriately expanding aggregate demand to ensure economic growth was within a reasonable range, Xu said.

    He reiterated that the government’s target was to achieve annual average growth of at least 6.5% between 2006 and 2020.

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    US decide to levy punitive duties on corrosion-resistant steel products from China

    The US trade authority ruled Friday that the domestic industry is "materially injured" by imports of corrosion-resistant steel products from China, India, Italy and the Republic of Korea, which means the US government will impose punitive duties on the products.

    All six commissioners of the US International Trade Commission (USITC) voted in the affirmative, saying a US industry is materially injured by reason of imports of corrosion-resistant steel products from above countries that are allegedly subsidized and sold in the United States at less than fair value.

    "The US steel industry has been in a state of overprotection," said an official from the Chinese Ministry of Commerce on Thursday, pointing out the United States has conducted a total of 161 trade remedy rulings on various steel products worldwide by the end of April 2016.

    As a result of the Commission's affirmative determinations, the US Commerce Department will issue antidumping and countervailing duty orders on imports of these products from China.

    For products from China the antidumping duty rate is 209.97 percent and the countervailing duty rates are 39.05 percent and 241.07 percent, according to the Commerce Department's final determination in May 2016.

    This is the second final ruling made by the US trade authority against imports of China's steel products this week. On Wednesday the USITC made a final ruling to allow the Commerce Department to impose antidumping and countervailing duty on imports of cold-rolled steel flat products from China.

    In 2015, imports of these products from China under investigation were estimated at about $500.3 million, according to US official data.

    China has repeatedly urged the United States to abide by its commitment against trade protectionism and work together with China and other members of the international community to maintain a free, open and just international trade environment.

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    Baosteel, Wuhan Steel to announce restructuring plans

    Baoshan Iron and Steel Co and Wuhan Iron and Steel, two of China's largest steelmakers, announced on Sunday that they would suspend share trading on the Shanghai Stock Exchange amid ongoing strategic restructuring planned by their respective parent companies.

    The restructuring plans are still subject to regulatory approval, and due to uncertainties surrounding the matter, both companies have applied to halt trading of their shares on the Shanghai bourse from Monday (Jun 27), according to the filings of the two, which state that "after five trading days the companies will release a new development on the restructuring".

    According to the 2015 ranking of the world's major steel-makers by the World Steel Association, Shanghai-based Baosteel is China's second largest and the world's fifth largest steel-maker by output, producing 34.94 million metric tons last year, while Hubei-based Wuhan Steel was rated China's sixth and the world's 11th largest steel mill-producing 25.78 million tons.

    "The two parties are currently only at the very beginning of forming a restructuring intention, without any detailed work rolled out. So the process is full of uncertainties," said Sun Jin, director of public relations at Wuhan Steel.

    Rumours of a possible merger between the two steel plants, which would be the biggest in the history of China's steel industry, have been rife over the past 12 months.

    Analysts have said a merger could capitalize on Wuhan Iron and Steel's expertise and advanced technology in oriented silicon steel combined with the leading market position of Baosteel, which supplies about 50 percent of the steel sheet metal used by China's auto industry.

    Wang Guoqing, consultancy director at the Lange Steel Information Research Center, a Beijing-based industry think tank, said a merger would produce a new steel group that would be more competitive in both the domestic and overseas market.

    "The Chinese government has been working on increasing concentration in the steel industry," Wang said. "Any merger may trigger a round of mergers in the industry. Some companies with low profitability may be gobbled up."

    Xu Xiangchun, a senior analyst with Mysteel, a Shanghai-based steel information consultancy, said a merger would bring useful experience to an industry facing weak demand and severe overcapacity.

    "The two giant players would set an example for other steel companies on how to work together and integrate smoothly to survive the market.," said Xu.

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    Anglo American closes in on sales of Australian coal assets

    Anglo American is likely to conclude the sale of its Australian coking coal mines within weeks, said sources who have been close to the sales process.

    A sale of the Moranbah and Grosvenor mines would be a key component of Anglo’s debt reduction plans as it tries to persuade investors that it can stave off the consequences of lower commodity prices.

    The efforts by Anglo to sell the mines come in spite of global pressure on coal producers because of weak prices and concerns over the fuel’s role in increasing carbon emissions.

    Anglo stepped up its asset sale plans in February. It has sold a trio of smaller Australian coal mines in recent months, while it also sold niobium and phosphate deposits in Brazil for $1.5 billion in April, as part of plans for between $3 billion and $4 billion of asset disposals this year.

    Glencore was among the groups to consider a bid for the Anglo coal assets but sources said the Switzerland-based group was no longer in the process.

    Apollo, the private equity group, has also been considering a bid for the assets.

    BHP, the world’s largest mining group by market capitalisation, is seen as a potential buyer because of the synergies it could achieve with one of its own Australian coal businesses. BHP has a joint venture with Mitsubishi of Japan that owns several nearby mines in the same Bowen Basin coal district of Queensland.

    BHP has also insisted it sees a good long-term future for coal, in spite of the pressure on the fuel culminating in this year’s filing for bankruptcy protection from Peabody Energy, the world’s largest coal miner.

    Grosvenor, one of the mines that Anglo wants to sell, has only just gone into production after a five-year development. However Anglo has since decided to focus its entire portfolio on production of copper, diamonds and platinum.

    Seamus French, who runs Anglo’s coal business, said last month that while the Grosvenor mine may not fit Anglo American’s strategic portfolio choices, “its long-term commercial attractiveness is beyond question”.

    Anglo presents its interim results to investors in late July and while the company would like to conclude a sale before then, people aware of the process say no firm deadline has been set.

    Anglo’s shares plummeted last year, losing three-quarters of their value amid the commodities rout. But they have recovered strongly and are up 120% since the start of 2016.

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    Fortescue’s rating upgraded after debt reduction

    Ratings agency Moody’s Investors Service on Friday upgraded the outlook of Australian iron-ore company Fortescue Metals’ corporate family rating to stable and affirmed the rating at Ba3. 

    According to a Fortescue statement, Moody’s said that the company’s recent efforts to reduce its debt had lowered its breakeven costs and created a substantial buffer to maintain leverage metrics at adequate level for the miner’s rating, even under the lower iron-ore price scenarios. 

    “We are pleased that Moody’s has recognised Fortescue’s operating performance, significant progress in reducing costs and the generation of strong operating cash flows. This has enabled the company to continue to reduce debt levels while maintaining solid liquidity,” commented Fortescue CFO Stephen Pearce. 

    Fortescue had repaid $2.9-billion of its debt in the 2016 financial year, lowering its interest expenses by $186-million.
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    India’s coal output increasing, coal imports to drop further this fiscal

    "Coal imports will continue to come down with increased availability of coal (domestic)," Coal Secretary Anil Swarup told reporters on the sidelines of an event in New Delhi.

    As per the data of first two months of this fiscal, the import of coal is likely to reduce, he said.

    "Quantities I cannot predict how much will come down. I have no doubts that coal imports will come down. Last fiscal, we saved Rs 24,000 crore and we are aiming Rs 40,000 crore of saving this year (2016-17)," Swarup said.

    Noting that the demand of coal is not going at the envisaged hope in the country, Swarup expressed hope that Uday scheme will help boost the demand for the dry fuel in the days to come.

    "We will continue to produce. We are not revising the (coal production) target," he stressed.

    He further stated that response to the ongoing auction of coal linkages for the non-regulated sector has been encouraging.

    When asked about Coal India's plans for acquiring coal mines overseas, the secretary said, "The ground work has been done in South Africa. Now final discussions are on."

    Registering a drop of 19.2%, coal imports stood at 16.38 million tonnes last month on the back of sufficient availability of domestic fuel.

    Last year, it was around 20.29 million tonnes.

    The import of coal came down by 15% to 15.9 million tonnes in April this year.

    In 2015-16, Coal India (CIL) which accounts for over 80% of domestic output, achieved a record production of 536 million tonnes, which was 42 million tonnes more than the previous fiscal.

    Its production grew 8.5% year-on-year. CIL was, however, eyeing 550 million tonnes output.

    CIL's output is fixed at 598 million tonnes for this fiscal.

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