Mark Latham Commodity Equity Intelligence Service

Friday 2nd June 2017
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files






    Macro

    Trump's Paris Adieu Is a Win for Coal and Oil But Not a Big One


    The biggest winners in President Donald Trump’s decision to walk awayfrom the Paris climate accord are oil, coal and natural gas producers. And even they aren’t popping Champagne corks.

    The president, who has called climate change a hoax, cast aside any lingering doubts about his commitment to fossil fuels Thursday when he announced the U.S. would quit the global agreement to cut greenhouse gas emissions.

    In theory, that bodes well for miners, oil drillers and gas companies. Yet coal stocks slipped Wednesday after news first leaked out of Trump’s decision. And two of the biggest oil producers, Exxon Mobil Corp. and ConocoPhillips, reiterated support for the accord. That’s because market forces and individual government policies play a far larger role in driving energy demand than the Paris accord. So while quitting may be a boon for fossil fuels, it’s not necessarily moving markets.

    “It’s symbolically important,” Anthony Yuen, an analyst at Citigroup Inc., said in an interview. “Numerically, it may not be as much.”

    On the flip side, renewable energy companies are the biggest losers in Trump’s decision. The Paris accord is designed to accelerate a transition away from fuels that emit greenhouse causing gases and toward wind, solar and electric vehicles. And indeed, shares of solar companies fell Wednesday after early reports of Trump’s decision, including JinkoSolar Holding Co., the world’s biggest supplier, and Canadian Solar Inc., the biggest North American panel maker.

    Short-Lived

    Analysts, however, predict those losses will be short-lived.

    “The impact is going to be irrelevant,” Richard Chatterton, a Bloomberg New Energy Finance analyst, said in an interview. “In terms of renewables, there isn’t going to be a change in the trend.”

    The reason boils down to state policies, economics and corporate demand. Even as Washington rolls back efforts to promote renewables, California, New York and other states are forging ahead. And after years of being supported by subsidies, wind and solar prices have plunged so much they can compete with fossil fuels in many areas.

    That’s prompting corporations including Amazon.com Inc., Facebook Inc., Anheuser-Busch InBev SA/NV and scores of others to buy renewable power. It’s also leading Consolidated Edison Inc., the Tennessee Valley Authority and other energy giants to forsake coal -burning power plants in favor of wind, solar and cleaner-burning natural gas.

    “Our businesses will continue to deliver clean energy solutions that make sense for our customers -- with or without the Paris agreement,” Jessi Strawn, a spokeswoman for the energy unit of Warren Buffett’s Berkshire Hathaway Inc., said in an email Wednesday.

    Divergent Views

    Some analysts see an unequivocal win for fossil fuels. Stephen Schork, president of Schork Group Inc., said investors were discouraged from wagering on hydrocarbons during President Barack Obama’s eight years in office. Now Trump is sending a clear message: place your bets.

    “The political winds have done a complete 180,” Schork said in an interview. “Pulling out of this accord will only further the oil and gas markets’ animal spirits.”

    “The winners are merchant generators with coal-burning plants,” Kit Konolige, a Bloomberg Intelligence analyst based in New York, said in an email Thursday. “Coal plants now have more flexibility to run longer. Big regulated utility owners like Southern, Duke and Xcel Energy probably won’t see much effect because it doesn’t matter to their earnings whether coal plants run.”

    On the other hand, Exxon and ConocoPhillips said the U.S. would be better off retaining a seat at the table, saying that staying in Paris would allow them to influence international efforts to reduce emissions from the oil they sell. Exxon Chief Executive Officer Darren Woods went further, saying at the company’s annual meeting Wednesday that oil demand will grow, with or without the accord.

    “Energy needs are a function of population and living standards,” Woods said. “When it comes to policy, the goal should be to reduce emissions at the lowest cost to society.”

    ‘A Great Pity’

    Coal producers were among the few companies that pushed for Trump to walk away from Paris, most notably Robert E. Murray, founder and CEO of coal miner Murray Energy Corp. Yet the industry isn’t united in the effort. Cloud Peak Energy Inc. CEO Colin Marshall said sticking with the accord would give the U.S. “influence” to ensure the future of fossil fuels.

    Trump argued that staying in the accord would handicap American businesses, making it difficult for them to compete with overseas rivals. Impax Asset Management Group CEO Ian Simm said the U.S. may wind up losing its competitive edge by dropping out.

    The U.S. is a global leader in energy efficient technology. Trump’s rejection of that effort may cause companies to think twice about some of their investments, opening the door for other nations to step in, Simm said in an interview.

    “You may well see that the leadership is taken by China and other Asian companies rather than the U.S.,” said Simm, whose company focuses on sustainability and has about $7.8 billion under management. “It would be a great pity for many of the U.S. leaders in that industry.”

    https://www.bloomberg.com/news/articles/2017-06-01/trump-s-paris-adieu-is-a-win-for-coal-and-oil-but-not-a-big-one
    Back to Top

    Top miner BHP sees 'huge demand' lift from China's new Silk Road


    China’s multi-billion dollar Belt and Road Initiative can deliver a major boost for commodities and will add about 150-million tons to global steeldemand, according to BHP Billiton, the world’s largest miner.

    The plan to develop infrastructure and rebuild ancient trading routes from China to Europe overland and by sea has seen projects initiated worth about $1.3-trillion, according to Melbourne-based BHP, the biggest exporter of coking coaland the third-largest iron ore supplier. Investments worth $313-billion to $502-billion could be funneled to 62 Belt-Road countries over the next five years, Credit Suisse Group AG said last month.

    “Everywhere where we see the infrastructure being built, on the back of that there will be economic development that will trigger copper demand, which will trigger energy demand,” BHP’s COO Arnoud Balhuizen told reporters Thursday in Melbourne. “Steel produced in China will be used along the road, and that of course is good for demand for our commodities.”

    BHP on Thursday lifted force majeure restrictions at Chile’s Escondida copper mine, where workers carried out a 44-day strike earlier this year, Balhuizen told reporters. Coking coalsales continue to be subject to restrictions following a cyclone in Australia in March, he said.

    The producer declined 0.7% to A$23.73 on Thursday in Sydney, extending its decline this year to 5.3%.

    The “One Belt One Road” initiative promises “huge demand for resources, services and technology,” and is “an opportunity like no other,” Balhuizen said earlier in a speech. BHP gets about 43% of full-year revenue from China and a total of at least 68% from Asia, according to data compiled by Bloomberg.

    China’s plan, lauded by President Xi Jinping as a "project of the century," has the potential to generate about 120-million tons of crude steel demand, according to Citigroup. Increased appetite from infrastructure will support steel even as there’s a slowdown in China’s housing sector, Templeton Emerging Markets Group Executive Chairman Mark Mobius said last month in an interview.

    Indian Prime Minister Narendra Modi’s plans for rural electrification, which aim to supply power to every citizen by 2019, and the drive to provide more affordable housing, will also boost commodities and are likely to “have a material impact on demand for coal, iron ore, copper and petroleum,” Balhuizen said in his speech.

    BHP sees global demand for potash growing at 2% to 3% a year through 2030, as the world’s population rises and crop demand swells by 50% by 2050, he said. BHP may seek board approval for its Jansen potash project in Canada as early as next June, the producer said last month.

    http://www.miningweekly.com/article/top-miner-sees-huge-demand-lift-from-chinas-new-silk-road-2017-06-01
    Back to Top

    Russia's big dividends.


    https://www.ft.com/content/29c3a72a-4518-11e7-8519-9f94ee97d996

    It is becoming an annual ritual. Each spring, Russia’s government presses its state-controlled companies to pay out more of their profits in dividends. The companies then scurry to find loopholes or lobby for exemptions.Moscow has been trying for years to increase the payout from “national champions” such as Alrosa, the diamond producer, Russian Railways, Transneft, the oil pipeline monopoly, and Rosneft and Gazprom, the energy groups. It first proposed state companies should pay out at least 25 per cent of net profits in 2012 and later sought more as low oil prices and sanctions squeezed budget revenues.Last year, the government demanded a 50 per cent payout, originally as a one-off anti-crisis move. But in April this year Dmitry Medvedev, the prime minister, signed a decree again ordering state companies to pay out 50 per cent of net income under International Financial Reporting Standards.The issue is vital for state coffers. The finance ministry’s projected revenues assume state companies will pay the full 50 per cent, with Rbs480bn ($8.5bn) in dividends earmarked for this year’s budget. Getting them to pay up is a test of how much control the government really exerts, and a way of trying to enforce tighter capital discipline.The payout ratio matters to investors, too. Many state-controlled companies have substantial and largely foreign-owned free floats. Expectations of higher payouts have underpinned recent investor interest in several of the businesses. If some groups, such as Gazprom, really moved to a 50 per cent payout ratio, a big jump in share prices could result.
    Back to Top

    BHP board set to select new chairman in June: sources


    BHP's board is expected to select a new chairman at its June meeting to replace long-serving former Ford Motor Co boss Jac Nasser, according to two sources familiar with the matter.

    The world's largest miner, under pressure from U.S.-based activist investor Elliott Management over its strategy, has been searching for a replacement since Nasser announced his impending retirement in October.

    Executive search firm Heidrick & Struggles has been assisting with a search that includes internal and external candidates, the sources said. They declined to be named because the process is not public.

    A source close to Elliott told Reuters last month the activist fund, which owns 4.1 percent of BHP's UK shares, would be willing to back an internal candidate for the role, but declined to disclose the fund's preference.

    Both Nasser, 69, and his predecessor, Don Argus, served on the board for at least three years before taking on the chairman's role.

    Craig Evans, the co-portfolio manager of the Tribeca Natural Resources Fund, said his fund would prefer an external candidate with technical and operational experience in the mining and oil and gas industries.

        "The existing board hasn't covered itself in glory," he said. "We have concerns that the majority of the board has been in charge for the financial underperformance and have not shown a track record of respecting shareholder capital compounded by the safety issues at (Brazil iron ore mine) Samarco."

    A burst dam at Samarco, a joint venture between BHP and Brazil's Vale, killed 19 people and caused Brazil's worst ever environmental disaster in 2015, when mud and waste destroyed a village and polluted the Rio Doce river.

    Andy Forster, a portfolio manager at Argo Investments, said he expected BHP would choose a current board member given the strong slate of candidates.

    "It would be surprising if someone external was to beat them and have the understanding of the business," he said. "If you look at Jac, they don't necessarily have to have someone with direct mining experience."

    BHP and Heidrick & Struggles declined to comment.

    The following are names mentioned by industry sources, investors and analysts as potential candidates.

    INTERNAL CANDIDATES:

    * Ken MacKenzie, 53

    Canadian-born MacKenzie, a former CEO of Melbourne-based global packaging group Amcor Ltd who has been on the BHP board for less than a year, is highly respected among investors. At Amcor he had a track record of smart acquisitions and brought cultural transformation to a company hit by a price-fixing scandal.

    "He's been one of Australia's most effective CEOs. He does tick a lot of boxes," said George Clapham, managing partner of Arnhem Investment Management, which owns BHP and Amcor shares.

    * Lindsay Maxsted, 63

    Maxsted, an Australian, has been on the BHP board for six years. The former corporate recovery specialist is the chairman of both the country's second largest bank, Westpac Banking Corp and toll road operator Transurban Group.

    Local media reports have said he is willing to step down from those roles if he gets the prestigious BHP job.

    * Carolyn Hewson, 61

    Hewson, an Australian, has been on the board for seven years and is a champion of gender diversity. The male-dominated company has set an aspirational target for half of its workforce to be female by 2025.

    The former investment banker is also a director at property group Stockland Corp.

    * Malcolm Broomhead, 64

    Broomhead, an Australian who has served on the board for seven years, has extensive experience in running industrial and mining companies with a global footprint. He also has experience in project development in many of the countries in which BHP operates.

    He is the chairman of explosives maker Orica Ltd, where he once served as CEO. He had previously headed miner North Ltd before it was bought by Rio Tinto.

    EXTERNAL CANDIDATE:

    * Andrew Liveris, 63

    Liveris, the Australian-born Chairman and CEO of Dow Chemical Co has spent more than 40 years with the U.S.-based company. He is due to step down as chairman of the merged DowDuPont in July 2018.

    He has been a leading adviser on manufacturing to U.S. President Donald Trump and his predecessor, Barack Obama.

    http://www.reuters.com/article/us-bhp-billiton-chairman-idUSKBN18S3LB
    Back to Top

    Dry bulk: Panamax, Supramax TCE rates sink 50% on sluggish demand


    Earnings, or time charter equivalent rates, for Panamax and Supramax vessels traded out of the key Indian Ocean region have sank more than 50% over the past month mainly because of lower-than-expected demand for South American grain and reduced coal exports from South Africa.

    S&P Global Platts TCE rate for an 81,000-dwt vessel delivered at east coast India for a trip from South Africa's Richards Bay Coal Terminal to Paradip on India's east coast was assessed at $5,116/day on May 31, down 65.52% from $14,838/day on April 18.

    The TCE rate for a 57,000-dwt Supramax vessel performing a similar trip was assessed at $4,291/day, down 53.94% from $9,317/day on April 20.

    The voyage charter rate on a Panamax vessel to move a 75,000-mt (plus/minus 10%) coal cargo from RBCT to Paradip was assessed at $8.75/mt on May 31, down $5.20/mt from $13.95/mt assessed on April 18.

    On the Supramax vessel, the voyage charter rate to move a 50,000-mt (plus/minus 10%) coal cargo from RBCT to Paradip was assessed at $10.75/mt on May 31, down $3.35/mt from $14.10/mt assessed on April 20.

    The TCE and voyage rates for Panamaxes and Supramaxes loading out of the Indian Ocean market have remained languid due to wobbly demand for South African coal following a spike in prices during the second half of May. The price of 5,500 kcal/kg NAR South African coal on a FOB basis was $65.50/mt on May 31, up from $61/mt on May 12, Platts data showed.

    Meanwhile, given fewer ships in general open in the Atlantic region for their next employment, vessels getting released in the Asia-Pacific region will ballast over to that region during grain export season, even though demand is currently lower than expected.

    "While ballasters [moving to east coast South America in search of grain cargoes] are keeping a tab on the markets, demand from other commodities too is missing," said a Singapore-based ship operator, adding that iron ore shipments out of west coast India have almost come to a standstill because of monsoon season.

    An India-based ship operator said some shipowners were less willing to lock in at a lower rate for a longer duration out of east coast South America. Instead, shipowners were more keen to do a shorter trip within the Indian Ocean, while waiting to see if rates improved out of east coast South America, he added.

    https://www.platts.com/latest-news/shipping/singapore/dry-bulk-panamax-supramax-tce-rates-sink-50-on-27839747

    Attached Files
    Back to Top

    Oil and Gas

    Rosneft CEO warns of oil market instability as U.S. producers ramp up exports


    The global oil output cut deal has given only a temporary breather, and rising oil exports by U.S. oil producers could create further instability on the oil market, Igor Sechin, the CEO of Russian oil giant Rosneft, said on Friday.

    Low oil prices are here to stay for a long time, and the market cannot stabilize unless all producers to curb their output, Sechin said.

    http://www.reuters.com/article/us-russia-economic-forum-oil-sechin-idUSKBN18T0OL

    SECHIN: BY MID-'18 SHALE OUTPUT MAY CANCEL EFFECTS OF OPEC DEAL
    Back to Top

    OPEC looked at extra 1-1.5 percent oil supply cut, could revive proposal


    OPEC discussed cutting its oil output by a further 1-1.5 percent when it met last week, three sources familiar with the matter said, and could revisit the proposal should inventories remain high and continue to weigh on prices.

    The Organization of the Petroleum Exporting Countries and non-member producers ultimately decided at their May 25 meeting to extend their existing supply-cutting agreement for nine months, although oil ministers including Saudi Arabia's Khalid al-Falih confirmed deeper curbs had been debated.

    One of the sources said the idea floated was to widen OPEC's supply cut by about 300,000 barrels per day (bpd).

    That would equate to a further curb of about 1 percent of April output of nearly 32 million bpd and bring OPEC's total pledged cut to 1.5 million bpd, from 1.2 million bpd.

    "They wanted to do some scenarios and get around 300,000 bpd of extra cuts to be distributed among everyone," the source, who declined to be identified, said. "But I think they decided to wait and see how the market will react first."

    The initial price reaction to OPEC's May 25 decision was one of disappointment that producers had not deepened their cuts. Brent crude fell 5 percent to below $52 a barrel and was trading near there on Thursday, half its level of mid-2014.

    OPEC officials nonetheless hope an inventory glut will ease in the next few months as market fundamentals move closer to balance. OPEC is not scheduled to meet again to set policy until November.

    "By the next meeting, if prices and the situation remain like this, they will have to do something ... Everyone will be on board (for more cuts) if prices remain like they are now," the source said, adding that he expected the market and prices to improve by the third quarter.

    A second source familiar with the matter said "everything is possible", when asked whether the option of a deeper cut could be revived.

    A third source, an OPEC delegate, was skeptical that a larger cut would be agreed on by all parties, including non-OPEC producers. "I doubt it," that source said. "There was a proposal for a deeper cut, but it didn't work."

    A fourth source, also an OPEC delegate, was skeptical for the same reason.

    "To ensure a proposal can be feasible, you need to see who can buy in," that delegate said. "I believe the number of countries who can buy in will be few. However, continuing the current agreement is much more acceptable even for a longer period of time until the rebalancing is achieved."

    WHATEVER IT TAKES

    OPEC, Russia and other producers agreed last year to cut production by 1.8 million bpd for six months starting on Jan. 1.

    Oil prices have gained from the pact but stockpiles remain high and production from non-participating countries, including the United States, has been rising, keeping crude below the $60 that top exporter Saudi Arabia would like to see this year.

    Riyadh is preparing to list around 5 percent of its national oil company Saudi Aramco in 2018 and wants higher oil prices ahead of the initial public offering (IPO) for a better valuation, industry and OPEC sources have told Reuters.

    "I think the Saudis have a target oil price for the Aramco IPO," the first source said. Falih, however, said after OPEC's meeting that the IPO did not affect the decision to extend the duration of the supply cut.

    A deeper cut, along with extending the curbs for various lengths of time, were among the scenarios reviewed by an OPEC panel, the Economic Commission Board, days before the OPEC ministerial meeting.

    Falih, who currently holds the OPEC presidency, said after the May 25 meeting that keeping the existing cuts for another nine months was the best outcome.

    On Wednesday in Moscow, Falih reiterated his country's position to do "whatever it takes" along with Russia to help stabilize the market, signaling an open-ended policy to reduce the inventory overhang.

    OPEC has a self-imposed goal of bringing inventories in industrialized countries down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

    The next OPEC meeting is on Nov. 30 in Vienna. Another panel, the Joint Ministerial Monitoring Committee, will convene in Russia in July and has a mandate to recommend adjusting the supply pact, if needed.

    http://www.reuters.com/article/us-opec-oil-idUSKBN18S50M
    Back to Top

    Saudi Aramco trading arm hiring staff for Singapore push: sources


    The trading arm of oil giant Saudi Aramco is looking to step up hiring for its Singapore office as it pushes into the regional energy hub, three sources with knowledge of the matter said.

    The office aims to employ 10 to 15 staff by year-end after opening with one person in late 2015, said one of the sources. That would include operational, analytical and administrative workers.

    A spokesman for Saudi Aramco Products Trading Company did not answer calls from Reuters.

    "The main aim is for employees to support trading activities of the head office in Saudi Arabia," said the first source. All three declined to be identified as they were not authorized to speak with the media.

    The office may also expand into trading beyond refined oil products and chemicals, the source continued.

    According to the company website, it is looking to hire a marketing coordinator, as well as an analyst to provide energy market research on crude oil, oil products and chemicals, preferably with experience working with an Indian state-owned oil company.

    Saudi Aramco Products Trading Company is now trading about 1.5 million barrels of refined, liquid chemical and polymer products every day across the globe.

    Saudi Aramco has a separate unit in Singapore, Aramco Asia Singapore, focused on marketing the company's own liquefied petroleum gas (LPG) and crude oil.

    http://www.reuters.com/article/us-aramco-trading-singapore-idUSKBN18S3U6
    Back to Top

    Chevron restarts production at Gorgon Train 1


    US-based energy giant Chevron has resumed production at the first liquefaction train at its multi-billion Gorgon LNG plant on Barrow Island in Western Australia following a shutdown earlier this month.

    “Production from Gorgon LNG Train 1 has resumed,” Chevron’s spokesperson told LNG World News in an emailed statement on Thursday.

    “Trains 2 and 3 are running normally, and we continue to ship cargoes,” the spokesperson said.

    Chevron closed the first Train on May 12 saying the cause of the closure was a failure of a flow measurement device.

    The company previously expected the unit to be down about one month.

    Chevron has in March started-up the third and the last Train at the Gorgon facility that has a total capacity of 15.6 million mt/year.

    The troubled $54 billion LNG project has experienced several production interruptions since it shipped its first cargo in March last year.

    The Gorgon LNG project is operated by Chevron that owns a 47.3 percent stake, while other shareholders are ExxonMobil (25 percent), Shell (25 percent), Osaka Gas (1.25 percent), Tokyo Gas (1 percent) and Chubu Electric Power (0.417 percent).

    http://www.lngworldnews.com/chevron-restarts-production-at-gorgon-train-1/
    Back to Top

    Indonesia looking to increase crude imports from Nigeria: NNPC


    Indonesia is looking to increase its crude purchases from Nigeria, state oil firm Nigerian National Petroleum Corp. said Wednesday.

    Harry Purwanto, Indonesia's ambassador to Nigeria, said during a meeting with NNPC group managing director Maikanti Baru in Abuja that the Asian country was seeking to increase crude imports to meet its surging energy needs, the NNCP said in a statement.

    "The Indonesia ambassador disclosed that his country looked forward to lifting crude oil directly from Nigeria, rather than through a third party as is currently the case," the NNPC said.

    The southeast Asian country is a keen consumer of Nigerian crude, buying around 30,000 b/d every month, according to S&P Global Platts estimates.

    The country's refiner Pertamina is a key buyer of Nigeria's largest export grade, Qua Iboe, buying around one cargo every month through a tender.

    Earlier this month, Pertamina issued a tender looking for a variety of West African crudes for the second half of this year. Traders said the amount of crudes tendered for was larger than normal, including a wider basket of crudes from the region, such as Nigeria?s Qua Iboe, Bonny Light and Escravos; Angola's Cabinda and Girassol; and Gabon's Rabi Blend.

    Baru urged Indonesia to consider participating in the forthcoming bid round in order to realize its aspiration of maintaining a presence in the Nigerian oil and gas sector.

    "The call by the ambassador signifies the prospects of soaring Nigeria's market share in Asian emerging economies which include China and India, having lost ground in crude oil sales in the [US] due to advances in shale oil exploration in recent years," Baru said, according to the statement.

    Indonesia, which produces around 900,000 b/d of crude, relies on imports to meet domestic demand of 1.4 million b/d, with Nigeria accounting for 18% of oil imports, the NNPC said.

    https://www.platts.com/latest-news/oil/lagos-nigeria/indonesia-looking-to-increase-crude-imports-from-27839511
    Back to Top

    Japan's Marubeni joins industry coalition to promote LNG bunkering


    Japan's Marubeni Corporation is the latest company to join SEA\LNG, a multi-sector industry coalition aiming to accelerate the widespread adoption of LNG as a marine fuel, SEA\LNG said in a statement Wednesday.

    This comes at a time when Japan, the world's largest LNG importer which accounts for about 35% of global demand, is set to play a significant role in LNG bunkering as the marine industry turns to cleaner fuel options to comply with stricter environmental regulations, including the International Maritime Organization's 2020 global sulfur cap.

    LNG far exceeds alternative options in terms of emissions reductions, as it emits zero sulfur oxides and virtually zero particulate matter. It can also emit 90% less nitrogen oxide than heavy marine fuel oil, according to SEA\LNG. With the use of best practices and appropriate technologies to minimize methane leakage, LNG offers the potential for up to a 25% reduction in greenhouse gas emissions, SEA\LNG said.

    "Although our company has expertise in multiple sectors, we view LNG as a core business field within our multifaceted service offering," Marubeni's Executive Officer and Chief Operating Officer of its Energy Division, Akihiko Sagara, said in the statement.

    "Together with our partners, we look forward to collaboratively working towards a cleaner, more efficient shipping environment," he added.

    Since its launch in July 2016, SEA\LNG's membership has expanded rapidly from 13 to 25 members, which comprise shipping companies, LNG suppliers, infrastructure providers, classification societies, downstream companies, major ports and original equipment manufacturers.

    https://www.platts.com/latest-news/shipping/singapore/japans-marubeni-joins-industry-coalition-to-promote-27839512
    Back to Top

    Eni sanctions Coral South FLNG project


    Italian oil company Eni has launched its Coral South floating LNG (FLNG) project offshore Mozambique.

    The President of the Republic of Mozambique Filipe Nyusi, the Minister of Mineral Resources Leticia Klemens, and Eni’s CEO Claudio Descalzi, participated on Thursday to the launch of the Coral South LNG project implementation phase.

    Managers from the partner companies were also in attendance, including CNPC’s Wang Yilin, Galp’s Carlos Gomes da Silva, Kogas’ Seunghoon Lee and ENH’s Omar Mitha.

    Eni said that, during the ceremony, all the drilling, construction and installation contracts for the production facilities were signed, as well as agreements with the Mozambican government for the regulatory framework and financing of the project.

    Coral South is the first project in the development of the considerable gas resources discovered by Eni in Area 4 of the Rovuma Basin. The sanction comes three years since the drilling of the final exploration well in a Mozambique.

    Eni noted that the Floating Liquefied Natural Gas (FLNG) unit will have a capacity of around 3.4 MTPA (million tons per year).

    The Italian energy company has said that its unit will be the first FLNG in Africa and only the third globally. However, it’s worth noting that Golar has said earlier this week that it hopes to start production from its FLNG Hilli Episeyo offshore Cameroon in September this year.

    The FLNG facilities construction will be financed through Project Finance covering around 60% of its entire cost. This is the first Project Finance ever arranged in the world for a liquefaction floater. The financing agreement has been subscribed by 15 major international banks and guaranteed by 5 Export Credit Agencies.

    Eni CEO Claudio Descalzi commented: “As the world transitions to a low-carbon energy mix, Eni believes that the use of gas is critical to achieving a more sustainable future. Our ambition to become a global integrated gas and LNG player is based on working alongside key partners such as Mozambique. The Coral South Project will deliver a reliable source of energy while contributing to Mozambique’s economic development.”

    The Coral field, discovered in May 2012, is located within Area 4 and contains approximately 450 billion cubic meters (16 TCF) of gas in place. In October 2016, Eni and its Area 4 partners signed an agreement with BP for the sale of the entire volumes of LNG produced by the Coral South project for a period of over twenty years.

    Eni is the operator of Area 4, through its participation in Eni East Africa (EEA), which holds a 70% participating interest in the concession while Portugal’s Galp Energia, South Korea’s Kogas and Mozambique’s Empresa Nacional de Hidrocarbonetos (ENH), each hold 10% stake. Eni holds 71.4% shares of Eni East Africa with China’s CNPC holding 28.6%.

    In March 2017 Eni signed an agreement to sell 50% of its shares in EEA to ExxonMobil, which will be completed subject to satisfaction of a number of conditions precedent, including clearance from Mozambican and other regulatory authorities.

    http://www.offshoreenergytoday.com/eni-sanctions-coral-south-flng-project/
    Back to Top

    Russia could boost oil output next year, to test new tax regime


    Russia could increase oil production next year to as much as 551 million tonnes, or 11.07 million barrels per day (bpd), and will begin testing a new tax regime to support output growth, Alexei Texler, first deputy energy minister, told Reuters.

    The increase will depend on how smoothly a global output-cutting agreement is wound down, Texler said, adding that this year's oil output was seen at 547 million tonnes.

    "My forecast for next year - 547-551 million tonnes - depends on how smooth the exit from the agreement is," Texler said in an interview.

    Russia and 10 other non-OPEC nations agreed last December to join OPEC output cuts for the first time in 15 years. Last week, the Organization of the Petroleum Exporting Countries and non-OPEC producers agreed to extend the curbs by nine months to March 2018.

    Russia has cut production by 300,000 bpd under the deal.

    Texler said a new tax regime was expected to be introduced in 2018 for selected oilfields for up to five years as part of efforts to increase production.

    If successful, it could be expanded to the entire domestic oil sector, already the world's largest by volumes produced.

    The bulk of Russia's oil production comes from mature fields in western Siberia and is subject to two key taxes - the mineral extraction tax (MET) and the oil export duty.

    Some oilfields, both mature and new, receive tax breaks and Russia has long been considering the introduction of a new, unified, profit-based taxation system instead.

    "Thanks to the profit-based tax, we expect that the fields covered will see an increase in production of up to 20 percent over the next five years," Texler said.

    The new tax regime will be tested at fields with combined production of 15 million tonnes a year (300,000 bpd). Five Russian oil firms have applied for the trial to be carried out at 21 fields, Texler said.

    The proposed switch has prompted a debate with the finance ministry, which fears the new system would be harder to control. The finance ministry also opposes plans to apply both the new tax regime and existing tax breaks.

    Rosneft, Russia's biggest oil producer, has been lobbying for a lower MET at Samotlor oilfield, one of its largest and which is battling water inundation. The finance ministry has instead proposed testing the profit-based tax at Samotlor.

    Texler did not comment specifically on Samotlor but said that in the energy ministry's view, the profit-based tax and tax breaks for so-called watered fields were separate issues.

    Special tax regimes and breaks have helped to increase production and budget revenues, he said. Without them, he added, oil production would have been 470 million tonnes at best, while it reached 547.5 million last year.

    Texler added that the oil export duty, which under the existing tax regime has been gradually cut while the MET has risen, was not expected to come to zero before 2021.

    http://www.reuters.com/article/us-russia-oil-production-idUSKBN18S4IK
    Back to Top

    Total, Exxon interested in oil and gas exploration off Crete


    A joint venture of Total, ExxonMobil, and Hellenic Petroleum (HELPE) has submitted an official application of interest to explore for hydrocarbons in two blocks off the Greek island of Crete.

    The joint venture, with Total as the operator, on Wednesday submitted the application to the Ministry of Environment and Energy and to EDEY, the Greek Hydrocarbons Management Company, expressing its interest to explore for hydrocarbons in two adjusted offshore blocks in Crete.

    According to a statement by Greece’s oil company, Hellenic Petroleum, the companies expressed their willingness to explore in these deep water frontier areas, anticipating the Greek state to accept the application and release an international tender, as per the Greek Hydrocarbons Law in force.

    President of Hellenic Petroleum, E. Tsotsoros, noted: “If indeed the existence of exploitable hydrocarbons is verified, it is certain that our country will enter a new era, with obvious benefits for the national economy and the local communities, and will contribute to the geopolitical and energy upgrade of Greece.”

    The company’s CEO, Gr. Stergioulis, said: “The three companies combined, Total-ExxonMobil-HELPE, compose a powerful business venture that possesses specialized and advanced expertise as well as robust financial magnitude, which are required for the successful outcome of the complicated endeavor of deep water exploration.

    “The Hellenic Petroleum Group is fully aware of the responsibility of undertaking such an effort of unprecedented complexity, and commits to proving worthy of the Greek Government’s trust, if it is selected.”

    http://www.offshoreenergytoday.com/total-exxon-interested-in-oil-and-gas-exploration-off-crete/
    Back to Top

    Gazprom’s export of natural gas to Germany rising


    Gazprom’s export of natural gas to the German market jumped 15.7 percent in the January-May period in 2017, in comparison to the corresponding quarter last year.

    In total, Gazprom delivered 22.3 billion cubic meters of gas to Germany, Russian giant’s head Alexey Miller and Uniper’s CEO Klaus Schaefer, noted during their meeting in St. Petersburg.

    In 2016, Gazprom’s gas supplies to Germany hit 49.8 billion cubic meters, a 10 percent increase compared to 2015.

    The two parties also discussed the cooperation on the Nord Stream 2 project, saying that “the signing of the financing agreements was crucial to the implementation of the project.”

    Nord Stream 2 is the construction project for a gas pipeline with the annual capacity of 55 billion cubic meters from Russia to Germany across the Baltic Sea. The project is implemented by Nord Stream 2, where Gazprom is the sole shareholder.

    In April Nord Stream 2, Engie, OMV, Royal Dutch Shell, Uniper and Wintershall Holding signed the financing agreements for the Nord Stream 2 project.

    http://www.lngworldnews.com/gazproms-export-of-natural-gas-to-germany-rising/
    Back to Top

    US Lower 28 production up 20,000 bbls



                                                Last Week   Week Before  Last Year

    Domestic Production '000.......... 9,342           9,320          8,735
    Alaska ................................................ 507     .        505          .   510
    Lower 48 ....................................... 8,835           8,815          8,225

    http://ir.eia.gov/wpsr/overview.pdf
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending May 26, 2017


    U.S. crude oil refinery inputs averaged over 17.5 million barrels per day during the week ending May 26, 2017, 229,000 barrels per day more than the previous week’s average. Refineries operated at 95.0% of their operable capacity last week. Gasoline production increased last week, averaging over 10.4 million barrels per day. Distillate fuel production increased last week, averaging over 5.2 million barrels per day.

    U.S. crude oil imports averaged 8.0 million barrels per day last week, down by 309,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.1 million barrels per day, 6.6% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 703,000 barrels per day. Distillate fuel imports averaged 105,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 6.4 million barrels from the previous week. At 509.9 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 2.9 million barrels last week, but are near the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.4 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories increased by 3.4 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories decreased by 5.2 million barrels last week.

    Total products supplied over the last four-week period averaged 20.4 million barrels per day, up by 0.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.6 million barrels per day, down by 0.7% from the same period last year. Distillate fuel product supplied averaged 4.2 million barrels per day over the last four weeks, up by 3.0% from the same period last year. Jet fuel product supplied is up 6.0% compared to the same four-week period last year.

    Cushing down 800,000 bbls

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
    Back to Top

    Carlyle OFS Exec: It's Dangerous to Declare Industry in Recovery


    Carlyle Group principal cautions crowd at Louisiana Energy Conference that not all of the oil and gas industry is rebounding as conventional and offshore service companies continue to struggle.

    An uneven recovery is taking hold of the oil and gas industry, and if folks don’t realize that some sectors continue to struggle, industry exuberance can quickly retreat to the downturn’s despair.

    Stuart Page, principal in oilfield services and equipment at The Carlyle Group, said taking the same approach to the post-downturn economy as the one that led to plummeting commodity prices will imperil the industry.

    “I think it’s dangerous that we’re all looking at this as the new recovery. If everybody thinks the same thing, we’re all going to apply the same [excessive] valuations, we’re going to end up with the same problem all over again,” Page said during a panel at the Louisiana Energy Conference in New Orleans on May 31.

    “This time, if we call it a recovery, it’s very, very specific to who’s recovering. The unconventional space in the Permian is great, but if you’re a conventional producer somewhere much less popular, life is not so great. If you’re an oilfield service company offshore, it’s tough times still, and no recovery in sight.”

    As production at unconventional plays heats up, pressure is on for oilfield service providers (OFS) to re-equip and staff their crews. And generally, their bills to the exploration and production (E&P) companies are going to increase, but Page said the rate is still unknown. The OFS sector collectively says a cost increase of up to 20 percent is necessary this year; some E&P companies exploration and production companies are balking at such a hike.

    “I see this big gulf between the E&P companies and the service companies,” Page said. “We’ll see who wins.”

    http://www.rigzone.com/news/article.asp?hpf=1&a_id=150405&utm_source=GLOBAL_ENG&utm_medium=SM_TW&utm_campaign=FANS

    Attached Files
    Back to Top

    Pennsylvania pipeline fight could upend international oil flows


    Refiners from the Midwest United States are fighting for access to a vital Pennsylvania pipeline – a move that could cripple their East Coast competitors and redraw the map for international flows of crude and fuel into coveted coastal markets.

    The regulatory dispute centers on a proposal by pipeline operator Buckeye Partners’ to that state's Public Utilities Commission. The plan would reverse the flow of fuels on a section of Buckeye’s 350-mile Laurel Pipeline, which currently flows from the East Coast to Pittsburgh.

    Because pipelines only flow in one direction, the change would effectively block five East Coast refineries from serving Pittsburgh – with Midwest refiners picking up their market share.

    The commission will decide on whether to allow Buckeye to reverse the flow from Pittsburgh, near the state’s western border, to Altoona, a small city about a hundred miles to the east.

    Initially, such a reversal would cost East Coast refiners about $10 million annually, according to a study gasoline marketer Gulf Operating commissioned to include in its objections to the Buckeye proposal. Piping gasoline to Pittsburgh yields some of their highest per-barrel profits.

    But opponents, including East Coast refiners and some state lawmakers, are far more worried that such a decision would presage a reversal of the entire pipeline. That would take Midwest fuels all the way to Philadelphia on the state's eastern border, where it connects to distribution networks serving the entire eastern seaboard.

    For Buckeye, the move represents a bet that surging Midwest refiners will be better customers - keeping its pipeline full to capacity - than their struggling East Coast counterparts.

    The stakes are much higher for the refiners involved. Midwest refiners could gain a huge market opportunity to pipe fuels into the East Coast, the largest U.S. gasoline market.

    Their products could also make their way to the New York Harbor, a major gasoline trading hub, where they would likely displace imports from Europe that currently account for about 23 percent of the fuel consumed in the region.

    For East Coast refiners, access to the Laurel pipeline is a matter of survival.

    "I have terrible anxiety, to say the least, when I see this proposal," said Anthony Gallagher, business manager for the local Philadelphia pipefitters union, speaking at a recent hearing on the proposal in Harrisburg, the state’s capital. “It will totally choke off these refiners, and they will have to start laying people off. Then, they will shut down.”

    Buckeye’s proposal has also drawn formal objections from state lawmakers and two refiners from the Philadelphia region, Philadelphia Energy Solutions (PES) and Monroe Energy, a subsidiary of Delta Airlines. Together, they employ about 1,000 people.

    The two other firms operating East Coast refineries - PBF Energy and Phillips 66 - also own Midwest refineries, which gives them conflicting economic interests in the outcome.

    PBF Energy and Phillips 66 did not respond to Reuters’ requests for comment, and neither has filed comments with the commission.

    PES and Monroe declined to comment to Reuters but filed formal written objections to the commission.

    Monroe argued that approving Buckeye’s plan would require East Coast refiners to “reduce output or sell petroleum products at drastically reduced prices” into an already oversupplied market.

    A delegation of Philadelphia-area lawmakers sent a letter warning the commission of “devastating economic effects.”

    Buckeye’s attorney David MacGregor countered that consumers will reap the economic benefits.

    Midwest refiners, he said at a recent commission hearing, could lower gas prices throughout Pennsylvania and lessen the region’s reliance on imported oil.

    A decision on the reversal is not likely until the fall and rests with the five-member state board. The five board members declined to comment through a commission spokeswoman.

    SURVIVAL STRUGGLE

    East Coast refiners have already closed plants because of their precarious competitive position.

    The region's refineries currently meet about one-fifth of gasoline demand on the East Coast, according to the U.S. Energy Information Administration. The rest comes from Gulf Coast refiners, via the Colonial and Plantation pipelines, and imports from Europe and Canada.

    Currently, Pittsburgh can access fuels from either the Midwest – through other pipelines owned by Buckeye - or the East Coast, whichever is cheaper at the time.

    Losing that market would be a blow to the East Coast plants, but the impact would be far more dire if Buckeye ultimately seeks to reverse the flow of the Laurel line all the way to Philadelphia.

    That’s why both Philadelphia refineries and other opponents have argued that regulators must consider Buckeye's broader intent - a possible reversal of flows along the entire pipeline - in deciding the current dispute over reversing a smaller section.

    "It is imperative that there be a full investigation” of Buckeye’s long-term plans, Philadelphia Energy Solutions argued in a filing to the commission.

    In an interview with Reuters, a Houston-based Buckeye executive would not rule out seeking future reversals that would extend Midwest refiners’ pipeline access to Philadelphia.

    “We go where the market wants us to go,” said Bill Hollis, a Buckeye senior vice president.

    THE COMPETITIVE EDGE: CHEAP CANADIAN CRUDE

    The market is tilting in favor of Midwest refiners mostly because they can access cheaper crude than their East Coast counterparts.

    Midwest refiners including Marathon Petroleum and Husky Energy and Phillips 66 have added nearly a half-million barrels of daily refining capacity in the last ten years, tailoring their systems to run crude out of Canada and North Dakota’s Bakken shale oil field.

    Today, Midwest refiners process 80 percent of the crude that the U.S. imports from Canada, according to the U.S. Energy Information Administration (EIA), and crude from Western Canada can be purchased for $14 a barrel less than benchmark U.S. crude.

    Midwest refiners can access Canada's crude via pipeline; East Coast refiners have to pay more to get it shipped on boats or trains.

    Adding to their competitive advantage, Midwest refiners will soon be able to tap Bakken crude through the nearly completed Dakota Access Pipeline.

    The East Coast refiners import most of the oil they turn into gasoline and diesel from West Africa and South America, and the region must import gasoline from Europe and Canada to meet local demand.

    Buckeye’s proposal is a bet on the future of the Midwest refineries - and against those on the East Coast, Hollis said.

    “You don’t have to have 35 years in the industry to know where the trend is going," he said.

    http://www.reuters.com/article/us-usa-pipelines-refiners-insight-idUSKBN18T0EO
    Back to Top

    Dakota Access Pipeline starts moving oil after years of controversy, protest


    The Dakota Access Pipeline started shipping oil Thursday, a milestone in the project after a protracted legal battle and temporary halt in construction.

    Energy Transfer Partners LP ETP, +0.87%  , one of the pipeline’s owners, said the $3.8 billion pipeline spans nearly 1,180 miles and can transport as much as 470,000 barrels of oil daily.

    Ramping up the amount of oil that can flow through the pipeline will take time, according to ESAI Energy, a consulting firm that has tracked the progress of the project. The pipeline is expected to hit 75% of its capacity by the end of the year.

    The Dakota Access Pipeline is part of a system that transports oil from the Bakken and Three Forks production areas in North Dakota to a storage hub outside Patoka, Ill., and later to terminals in Nederland, Texas. The launch of commercial service comes more than three months after President Donald Trump signed an executive order to restart the project, fulfilling a campaign pledge to reverse actions to delay construction taken by former President Barack Obama.

    http://www.marketwatch.com/story/dakota-access-pipeline-starts-moving-oil-after-years-of-controversy-protest-2017-06-01
    Back to Top

    Perry To Sign Agreement To Facilitate LNG Exports To Japan



    U.S. Energy Secretary Rick Perry’s ongoing trip to Japan is slated to be a boon for liquefied natural gas (LNG) exporters. Sources told Bloomberg that Perry will sign an agreement to promote American LNG in resale venues for developing nations surrounding Japan.

    A natural gas oversupply problem has pushed Tokyo to become a LNG resale hub for the developing countries in its circuit. At this point, Japan is the largest LNG importer in the world.

    “The Secretary looks forward to having a productive dialogue with Japanese officials about a multitude of issues, including the potential for increased LNG exports from the United States to Asia,” Shaylyn Hynes, a spokesperson from the Department of Energy, said in an email.

    American LNG exports to Japan have occurred on an on-and-off basis since June 2011, data from the Energy Information Administration (EIA) shows. Currently the commodity is sold at a rate of $7.18 per thousand cubic feet – the highest level since August 2015.

    In January, Japan bought its first shipment of liquefied natural gas derived from fracking. The 70,000-ton cargo was the first of a series of shipments that will total 700,000 tons by the end of 2017.

    “In 2016, most US LNG exports went to customers in the Western Hemisphere,” Richard D. Kauzlarich, former U.S. ambassador to energy hubs Azerbaijan and Bosnia said earlier this year. “[S]hipments to East Asia (especially Japan and China) will overtake destinations in this hemisphere in 2017.”

    Asian destinations for American oil and gas exports will spur the kind of economic development President Donald Trump promised constituents during his campaign, analysts say. Congress allowed companies to begin selling oil to other countries in December 2015, with the approval of the Obama administration.

    “We see few better ways for the Trump administration to deliver on its promises of job creation and trade deficit reduction, than liquid natural gas agreements with major importers, such as China, India, Korea and Japan,” said Michael Roomberg of the Burner Tip Fund.

    http://oilprice.com/Latest-Energy-News/World-News/Perry-To-Sign-Agreement-To-Facilitate-LNG-Exports-To-Japan.html
    Back to Top

    U.S. East Coast crude-by-rail loading's at 5 monitored facilities fell to zero


    U.S. East Coast crude-by-rail loading's at 5 monitored facilities fell to zero w/e May 19, says @Genscape

    @BloombergBriefs  
    Back to Top

    Uranium

    Russia signs deal to expand India's Kudankulam nuclear plant


    Russia signed an agreement with the Indian government on Thursday to build two new reactors for the Kudankulam nuclear power station in Tamil Nadu and said it would loan India $4.2 billion to help fund construction.

    President Vladimir Putin says Russia is ready to build a dozen nuclear reactors in India over the next 20 years to back Prime Minister Narendra Modi's growth strategy for Asia's third-largest economy, which continues to suffer chronic power shortages.

    The agreement to build reactors 5 and 6 at Kudankulam was signed in St Petersburg during a meeting between Putin and Modi at an economic forum. It should help cement already close ties between the two countries.

    Atomstroyexport, a unit of Russian state nuclear corporation Rosatom, will carry out the work, Kremlin documents seen by Reuters showed.

    Russian Finance Minister Anton Siluanov told reporters the Russian government was lending India $4.2 billion from next year for a 10-year period to help cover construction costs.

    Separately, in a joint declaration, the two countries said they noted the "wider use of natural gas" which they hailed as an economically efficient and environmentally friendly fuel that would help reduce greenhouse gas emissions and help them fulfil the terms of the Paris climate change accord.

    http://www.reuters.com/article/us-russia-economic-forum-india-nuclear-idUSKBN18S5UL
    Back to Top

    Precious Metals

    Johnson Matthey expects higher catalysts demand after profit rises


    Johnson Matthey expects increased efforts to curb vehicle pollution to boost demand for its catalysts in the medium to long term, it said on Thursday, after reporting an 18 percent rise in annual operating profit and boosting its dividend.

    The British company, which this year divided into four sectors -- clean air, efficient natural resources, health and new markets -- said sales of catalysts rose 16 percent in the year to March 31.

    It said the quest for cleaner air, with many cities clamping down on transport pollution, would spur demand for catalysts, while it is also increasing its focus on batteries using nickel and lithium and on pharmaceutical ingredients.

    "Over a five-year period that market (catalysts) is going to grow almost irrespective of electric vehicles given the size of the base," Johnson Matthey Chief Financial Officer Anna Manz told Reuters, referring to the still small percentage of the market that has gone electric.

    "After that, it’s harder to predict."

    The company is also re-focusing to ensure it is strong in technologies for gasoline and diesel vehicles and in the Asian market, which is catching up with European pollution standards, Manz said.

    Doubts about diesel cars have grown as Volkswagen's dieselgate scandal has spread to other automakers and research has shown the health damage caused by diesel emissions.

    Some analysts are also predicting a quicker-than-expected uptake in electric vehicles, which do not use catalytic converters.

    The company reported an 18 percent rise in annual operating profit to 493 million pounds ($634 million) on revenue up 12 percent at 12.03 billion.

    It recommended a final dividend of 54.5 pence per share, up 5 percent.

    It said sales this year would be probably in line with the 6 percent growth delivered in the six months to March 31.

    Shares in Johnson Matthey were down 0.6 percent at 3,091 pence, lagging an FTSE-100 Index up 0.29 percent at 0945 GMT.

    "Today’s results do not flag any immediate problems. Nonetheless, guidance still implies at least no upgrade potential," analysts at Morgan Stanley said in a note.

    It rates Johnson Matthey "equal weight" or hold citing "a lack of near-term earnings impetus".

    http://www.reuters.com/article/johnsonmatthey-results-idUSL8N1IY0U1
    Back to Top

    Eurasia ready to apply for discovery certificate for Russian palladium, platinum project


    Russia-based Eurasia Mining has hit a significant milestone in the advancement of its Monchetundra palladium and platinum project, with the Russian State Agency for Subsoil Use (Rosnedra) approving the project’s reserves report and feasibility study.

    The approval allows Eurasia to apply for a discovery certificate, which is a prerequisite for a production licence.

    MD Christian Schaffalitzky on Wednesday described the Rosnedra approval of the project’s reserves as an “incredibly important” development at Monchetundra, which is located in the Kola Peninsula bordering Finland.

    "This excellent result has come considerably quicker than we had anticipated, as the reserves report and the feasibility study were only submitted for approval on December 31, 2016.”

    The Monchetundra project, in which South Africa’s Anglo American Platinum used to be a joint venture partner, now has State-approved, Russian standard C1 and C2 category reserves of 55.9 t (1.9-million ounces) palladium equivalent, with major gold and base metals credits, at two openpit locations occurring about 2 km apart.

    The reserves are fully compliant, as defined under the State Commission on Mineral Reserves, or GKZ, standards.

    Schaffalitzky reported that the development of its 80%-owned Monchetundra project would follow the same route as its West Kytlim project, which was brought into production last year.

    “We are working on creating partnerships with qualified firms to help realise the potential of this significant platinum, palladium, gold, copper and nickel mine, with the bonus of having an engineering, procurement and constructioncontract (EPC) with the financing inside it already in place.”

    Eurasia last year agreed an EPC deal with Chinese giant Sinosteel for a 1.7-million-tonne-a-year mine and beneficiation plant at Monchetundra, which includes financing. The total value of the Sinosteel contract is $176-million, with the Chinese group responsible for the debt finance of $149.60-million (85% of the contract value).

    Schaffalitzky said that the Monchetundra openpit was significantly larger than the West Kytlim operation and that it would seek to appoint a management company with experience in beneficiating platinum group metal (PGM) ores. Discussions were reportedly at an advanced stage.

    Eurasia also owns the Semenovsky tailings project, which comprises reserves of about two-million ounces total contained PMGs.

    http://www.miningweekly.com/article/eurasia-ready-to-apply-for-discovery-certificate-for-russian-palladium-platinum-project-2017-05-31
    Back to Top

    Base Metals

    India’s Nalco to open new bauxite deposit at its existing mines


    Hit by delays in securing a new mine, integrated aluminium producer, National Aluminium Company Limited (Nalco), has started the process to open a new bauxite deposit near its existing Panchpatmali mines in Odisha.

    The opening up of the new deposit along the south face of its existing mining operations will enable the Indian company to maintain its bauxite production at 6.825-million tons achieved during the 2016/17 financial year, a senior government official says.

    In 2015, the 70-million-ton Pottangi bauxite reserves, also located in Odisha, had been reserved for allocation to Nalco, but “bureaucratic hurdles” resulted in delays in handing over the new resource to the company, the official says.

    Hence opening up of the south face bauxite deposit at Panchpatmali is an imperative for Nalco’s alumina and aluminium capacity expansion plans, he adds.

    The integrated aluminium producer has already firmed up plans to install its fifth potline at its smelter in Angul, Odisha. The new potline will add 0.6-million tons a year of aluminium capacity, ramping up the company’s total capacity to one-million tonnes. The $1.87-billion project is scheduled for completion in the next three years.

    In tandem, the company will expand its alumina refinerycapacity, close to its mines, to add another one-million tons a year of alumina production to its existing output of 2.275-million tons a year, to feed the expanded capacity of its smelters and to merchant export the surplus alumina in global markets, the official says.

    In the short term, the raw material security for its expansion plans will be met through the opening of new mine at Panchpatmali, but in the long term, Nalco hopes to be using the bauxite reserves at Pottangi.

    The official said that the long-term raw material security had to be ensured by the government, as Nalco’s corporate strategic plan aimed to achieve a finished aluminium metal production target of one-million tons a year by 2020.

    http://www.miningweekly.com/article/indias-nalco-to-open-new-bauxite-deposit-at-its-existing-mines-2017-05-31
    Back to Top

    Steel, Iron Ore and Coal

    Coking coal price talks stall as steelmakers, miners spar on contract terms


    Talks between Australian miners and Japanese steelmakers over coking coal supplies have stalled as the Japanese companies are pushing to move to more flexible arrangements from the current quarterly fixed-price terms.

    The Japanese are backed by BHP, the world's biggest producer of coking coal, a key steelmaking ingredient. However, other miners are against upending the 45-year-old fixed price settlement mechanism. Any changes could potentially further roil a market hit by wild swings recently.

    Coking coal supply contracts between Australian miners and Japanese steelmakers are accepted as the benchmark around the world.

    Pricing could instead be set by using the monthly average of a daily spot price, said three sources close to the negotiations.

    While none of the companies involved has publicly stated the precise changes being sought, several industry sources said that Japan's steelmakers are pushing for change.

    "The days of the benchmark system as we know it are dead," said a source close to the negotiations.

    Should the changes be agreed, coking coal prices would be more closely aligned to that for iron ore, the other main steel making ingredient.

    When supplies are short, as recently after a cyclone hit supply chains in Australia, miners would get a windfall.

    But miners would also be hit by low prices when supplies are plentiful and demand is weak, while the reverse would apply for steel mills.

    Japanese steelmakers led by Nippon Steel and Sumitomo Metal Corp have long resisted the idea of more flexible pricing, preferring the stability of supply under term contracts. But that is changing.

    "They want index-linked or fluctuating pricing," said a source at one of the miners. "They are tired of quarterly discussions and want more third-party assessments."

    Meanwhile, another source with ties to the miners said talks were close to setting a benchmark price of around $195 a ton as early as Friday that would apply retroactively for the second quarter of 2017. The price roughly equates to the average coking coal price during March to May.

    BHP is aligned with the Japanese steelmakers, with Chief Commercial Officer Arnoud Balhuizen telling reporters in Melbourne on Thursday: "We are not participating in quarterly benchmarks."

    "Our conversations with our customers are very constructive," Balhuizen said. "We understand, probably triggered by the recent volatility in the market, people are more and more open to not fixing prices on a quarterly basis."

    Other miners led by Glencore and Peabody are resisting the moves since they sell coal with a lower heat content that could be priced at a discount to a spot market price, sources said.

    Prices for Australian premium coking coal surged to as high as $314 a ton earlier this year after Cyclone Debbie hit Queensland. They were quoted by S&P Global Platts at $149.20 per ton on Wednesday.

    The cyclone knocked out supply chains and forced a hiatus in talks on coking coal prices that would normally be wound up by March or April. The storm also forced Japanese steelmakers to scramble for alternative supplies.

    http://www.reuters.com/article/us-coal-australia-japan-idUSKBN18S4T1
    Back to Top

    EU urges U.S. to limit national security probe on steel


    The European Union warned the United States on Thursday that its investigation into U.S. steel imports should be limited to issues of national security and not result in unjustified, sweeping measures on exporting nations.

    President Donald Trump launched a trade investigation in April against China and other exporters of steel into the U.S. market, under a law that allows presidents to impose restrictions on imports for reasons of U.S. national security.

    In a written submission to the U.S. Department of Commerce seen by Reuters, the European Commission said that restrictive actions based on national security could not provide the lasting solution that the steel market needs.

    "On the contrary, their impact may create further distortions at global level with negative consequences, ultimately affecting the position of U.S. companies - both steel producers and also U.S. manufacturers which use steel," the submission to the U.S. investigation hearing said.

    The Commission said that U.S. steel imports might be higher year-on-year, but had decreased by about 25 percent between 2014 and 2016, with anti-dumping and anti-subsidy duties limiting Chinese products.

    The study, it said, should be limited to the issue of national security, adding that only about 3 percent of U.S. steel demand was used for national defense and homeland security purposes.

    A Commission spokesman said there was no evidence that imports, and certainly those from the EU, threatened U.S. national security.

    "Overcapacity is the root cause of the problems in the steel sector and only by working together can we find a solution and bring back fairness to the market and ensure a level playing field for our producers and workers," he said.

    U.S. Commerce Secretary Wilbur Ross has until early next year to prepare a report for the president, who can then take action to "adjust the imports".

    Trump's principle target would appear to be China, the world's largest steel producer, the subject of a pre-election pledge to crack down on Chinese trade practices.

    Chinese premier Li Keqiang arrives in Brussels on Thursday and is expected to commit with the European Union to the Paris climate accord and to address steel overcapacity "at its roots".

    http://www.reuters.com/article/us-usa-trump-steel-eu-idUSKBN18S5FL

    Attached Files
    Back to Top

    Hebei steel makers to participate in Belt and Road Initiative projects


    Hebei province in northern China will facilitate advanced steel, cement and other industrial firms to participate in construction projects in the Belt and Road Initiative countries in the future, said the provincial government in a notice.

    The province will provide policy and financial support for enterprises in outstanding industries, including steel, cement, glass, power, textile and equipment manufacturing, to establish international cooperation with neighboring countries in Asia and countries in Africa, the Middle and East Europe and Latin America by green field investment, pooling of interest, joint venture and contract projects.

    Wen'an Iron and Steel Co., Ltd under Xinwu'an Iron and Steel Group in Hebei signed a memorandum of cooperation with China Metallurgical Corporation last year to invest in comprehensive steel projects totaling 6 million tonnes in Malaysia, said Gao Wei, vice general manager of the company.

    It was the first Hebei-based private steel company that participates in global capacity cooperation with countries along the Belt and Road Initiatives, he added.

    Sarawak – the third largest economic state in Malaysia – has successively shifted its reliance to manufacturing and service industry from traditional agriculture, and steel projects supported by Wen'an Iron and Steel could fill in the market gap.

    Malaysian government reserved a space close to ports for the projects, which will greatly reduce production cost. These projects are expected to benefit emerging markets in South Asia, the Middle East and East Africa, and meanwhile create more than 10,000 jobs, said Wang Wen'an, president of the company.

    In 2016, a total of 33 enterprises in Hebei invested in projects in Belt and Road Initiative countries. Chinese firms' investment in these projects totaled $1.6 billion yuan, accounting for over 48% of total Chinese investment across the province.

    http://www.sxcoal.com/news/4556746/info/en
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC344951 Registered address: Commodity Intelligence LLP The Wellsprings Wellsprings Brightwell-Cum-Sotwell Oxford OX10 0RN.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2024 - Commodity Intelligence LLP