Mark Latham Commodity Equity Intelligence Service

Friday 2nd December 2016
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    Steven Mnuchin Says U.S. Growth Can Be 3% to 4%. Here’s Why That’s Hard

    The incoming Trump administration has set a big goal of generating a dramatic acceleration in U.S. economic growth to an annual pace above 3%. It’s an achievement that has eluded three of the last four presidents.

    “Our most important priority is sustained economic growth, and I think we can absolutely get to sustained 3% to 4% GDP, and that is absolutely critical for the country,” President-elect Donald Trump’snew pick for Treasury secretary, Steven Mnuchin, said Wednesday.

    But sustained growth at that level would defy recent history, and would be a big step up from the roughly 2.1% pace during the current economic expansion that began in mid-2009. While the GDP growth rate bounces around from quarter to quarter, it hasn’t seen sustained annual growth above 3% in more than a decade.

    The last president who oversaw average annual GDP growth above 3% was Bill Clinton, an achievement also reached by Ronald Reagan, Jimmy Carter, Lyndon Johnson and John Kennedy. Other presidents—Dwight Eisenhower and Richard Nixon, Gerald Ford and George H.W. Bush, George W. Bush and Barack Obama—fell short.

    Slower Growing

    Few recent presidents have achieved full-term economic growth rates of above 3.0%

    One obvious reason: Downturns in the business cycle can mar a president’s record. Mr. Obama took office during a deep downtown, for example, and the younger Mr. Bush’s two terms were bookended by recessions.

    But many economists also think the U.S. economy’s capacity for sustained growth has diminished over time, and especially since the end of the 1990s. They point to slower growth in the working population and declining participation in the labor force as well as subdued growth in labor productivity—the basic building blocks of economic growth.

    The nonpartisan Congressional Budget Office in August predicted long-run growth would average about 2%, “a significant slowdown from the average growth in potential output that occurred during the 1980s, 1990s, and early 2000s—mainly because of slower projected growth in the nation’s supply of labor, which is largely attributable to the ongoing retirement of baby boomers and the relatively stable labour-force participation rate among working-age women.”

    Without some changes, those trends will restrain growth under Mr. Trump and future presidents.
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    Peru aims to quickly auction off $34 bln of projects

    Peru will aim to quickly auction off $34 billion in proposed projects from highways to new mines to revive slumping investments and bring sorely needed development to rural areas, the new head of state bidding agency Proinversion told Reuters on Thursday.

    Alvaro Quijandria, who was appointed two weeks ago, said he is carrying out reforms in Proinversion that will make the agency more efficient and more active in far-flung provinces where public work investments have stalled in recent years.

    Proinversion contracts will be designed as public-private partnerships, Quijandria said.

    "From the portfolio of projects, 44 are state initiatives and 63 are from the private sector which we'll improve and help untangle from permits so they can happen faster," Quijandria said in an interview on the sidelines of a business summit in the coastal town of Paracas south of Lima.

    Proinversion will likely launch bidding on a cross-Andean highway and a railway to link two Andean towns in the first quarter, Quijandria said, declining to comment on how the projects might cost.

    Quijandria also said it was too early to talk about what a new public auction for a natural gas pipeline project would look like if the government decides to terminate Brazilian construction company Odebrecht SA's current concession as financing needed for construction has been stuck for more than a year.

    Peru is a leading global producer of copper, zinc and gold and enjoys one of the fastest growth rates in the region. But development in rural areas lags far behind the capital Lima, despite millions in mining proceeds that go to local governments every year.

    Quijandria said local authorities often lack the technical know-how needed to build meaningful public works in their districts, and that Proinversion would make sure they had help.

    President Pedro Pablo Kuczynski won this year's election on promises to boost sluggish domestic demand and job creation by ramping up investments in infrastructure projects.

    Kuczynski's government has criticized big public contracts awarded to a single bidders during the previous government and has promised that auctions would be more competitive during his term.
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    POBC adds currency controls

    Overnight, the PBOC added a unique form of "capital control" when China’s central bank announced it would limit the amount of renminbi that Chinese companies and individuals can remit outside the country, "imposing a cap for the first time in more than two decades", according to the SCMP, to stem the yuan’s outflow as the currency plumbs daily lows.

    As the Hong Kong publication reports, companies domiciled in China will be limited to net currency outflows equivalent to 30 per cent of the owners’ equity, according to Order No. 306 issued Monday by the People’s Bank of China. Commercial banks should “utilise an integrated prudential management for cross-border payment in both foreign currency and yuan,” according to the central bank’s statement.

    Among the other rules established by the PBOC in setting yuan-denominated loans to overseas entities, are the following, courtesy of Bloomberg and Reuters:

    Onshore corporates can only make yuan loans within quota; banks should stop handling business if cos use up quota
    Lender also has to have been registered for at least a year; borrower has to be a related entity
    Lender can’t make personal loan to overseas borrower, and also can’t use debt financing for purpose of an overseas loan to a foreign entity
    Party making a yuan loan to an overseas entity must first register the loan with SAFE; must keep loan within a certain limit which wasn’t specified
    Lenders should have shareholding relationships with borrowers
    Banks need to strictly examine whether use of yuan funds offshore is genuine and appropriate
    Interest rates for loans need to be above 0%
    Tenor should be 6 mos to 5 yrs; loans with maturities of 5 yrs or above need to be registered at local PBOC branches
    If lenders can’t justify why borrowers don’t repay debt on time, banks need to stop handling new business and report it to local PBOC branches

    This is a stunning reversal in government policy, which had previously encouraged the renminbi’s worldwide usage, part of a long-term strategy to internationalise the currency, culminating with the renminbi's admission into the IMF's SDR basket. Needless to say, the latest announcement will hardly impress the IMF which has been pushing for less government control of the currency.

    As SCMP notes, among the other measures, not listed above to halt capital flight, the central bank has instituted a range of measures to plug gaps where the currency could be remitted amid its 7 per cent slump this year against the US dollar, from banning Chinese citizens from buying insurance policies offshore, to requiring credit card companies to seek currency licenses.

    Two days ago, Horseman Global's Russell Clark asked "Is China running out of money." With every incremental "capital control" the answer is becoming increasingly obvious.

    Attached Files
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    China short on trains for coal.

    China Faces Severe Coal Transport Capacity Shortage

    The nation's freight rail operator says it needs 100,000 more cars to meet strong demand for power during cold winter months

    China is suffering from a major shortage of trains to transport coal, a situation that follows a pause in construction of new rail cars and the scrapping of many old ones due to oversupply and weak demand over the past three years.

    Beijing has embarked on a campaign to eliminate excess capacity in a number of industrial sectors, with coal and iron both set for sharp reductions. Much of the excess was built to feed China's hungry economy during years of breakneck growth, when annual expansion routinely reached 10% or more.

    But a new phase of slower growth, sluggish demand and trade barriers overseas have prompted Beijing to reduce capacity in a bid to shore up sagging prices. Coal prices have jumped sharply as a result of those reductions, compounded by strong demand for electricity during the cold winter months.

    As a result of those factors, the country now faces a shortage of about 100,000 rail cars for coal transportation, according Guo Yuhua, a senior official at China Railway, operator of the country's passenger and freight rail systems. He said that with a few exceptions, freight capacity is now being completely utilized on most of China's rail lines, creating a transportation crisis.

    To address the shortage, China Railway has deployed 20,000 flatbed rail cars, and another 20,000 open cars, Guo said.

    China Railway shipped 170 million tons of coal in October, up 6.6% from a year earlier. Beijing has set a reference shipping price of 15.51 fen (2.25 U.S. cents) per ton of coal, and the operator can charge up to 10% more than that rate based on demand.

    The Bohai-Rim Steam-Coal Price Index, which measures domestic thermal coal prices, has risen more than 60% from the beginning of the year after the government ordered mines to cut production to trim overcapacity and fight pollution. This has led to a coal shortage heading into winter when demand typically peaks.

    Attached Files
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    Trump/Ryan Tax Plan: hammers importers!

    The path for tax reform put forward by House Speaker Paul Ryan and fellow House Republicans would appear — at least at first blush — to offer a clear answer: taxing imports but not exports, in a reversal of current policy that imposes corporate income taxes on exporters but not overseas producers with goods bound for the U.S.

    Proponents go so far as to suggest that this is a neat way for Trump to shift the tide of trade without provoking a trade war by slapping punitive tariffs on goods from China and Mexico.

    While the economic impact of the proposal is much more complicated, the immediate fate of the House GOP tax reform may rest on what Trump's working-class supporters find more alarming: anti-competitive U.S. tax policy or higher prices at Wal-Mart (WMT).

    The National Retail Federation has begun sounding the alarm about the House GOP plan released in June, when a clean sweep in the election for Republicans seemed like a distant long shot.

    Here's why retailers are girding for a fight: While cutting the statutory corporate tax rate to 20% from 35%, the House plan would no longer allow businesses to deduct the cost of imports from taxes. That means retailers such as Wal-Mart, Amazon (AMZN), Costco (COST), Dollar Tree(DLTR) and Starbucks (SBUX) would have to pay a tax equal to 20% of the cost of the clothing, televisions, toys and coffee they import.

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    Amazon moves truck???

    In Amazon Web Services, Inc. has built one of the most powerful computing networks in the world, on pace to post more than $12 billion in revenue this year.

    But the retail giant on Wednesday proposed a surprising way to move data from large corporate customers’ data centers to its public cloud-computing operation: by truck.

    Networks can move massive amounts of data only so fast. Trucks, it turns out, can move it faster.Image title

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    Kondratiev Spring?

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    Glencore to pay $1 billion dividend in 2017, debt on track

    Commodities trader and miner Glencore said on Thursday it would pay out $1 billion in dividends in 2017, had exceeded asset sales targets and would meet its goal this year to cut net debt.

    The news sent the share price around 2 percent higher by 0830 GMT, adding to gains of more than 200 percent since the start of the year.

    Glencore a year ago was one of the miners hardest hit by a commodity price crash but has been one of the biggest gainers as the markets have recovered this year.

    It had scrapped its dividend and announced a turnaround plan, saying in September 2015 it would sell assets worth $1-$2 billion and then in March increased that target to $4-$5 billion.

    On Thursday, Glencore said it had achieved $6.3 billion in asset sales this year.

    It also said it was on track to cut debt to $16.5 billion to $17.5 billion and gave detail on earlier promises to reinstate a dividend in 2017, saying it would pay out $1 billion next year.

    In addition, it would introduce a new distribution policy in 2018, which analysts estimated could add around another $1 billion depending on performance and commodity prices.

    It would include a fixed dividend of $1 billion, funded from marketing cash flow, and a variable distribution equal to at least 25 percent of free cash flow from the mining, or industrial sector.

    "We have delivered on our commitments and done so in a way that has preserved the long-term earnings capability of the group," CEO Ivan Glasenberg said in a statement.

    Analysts largely agreed with him.

    "There's not much you can fault with it," analyst Hunter Hillcoat of Investec said.

    Analyst Liberum was cautious, saying the dividend news was roughly in line with expectations, although it said some investors may have wanted a dividend earlier.

    Glencore differs from other mining groups in the size of its marketing division, which it says is more resilient during commodity downturns.

    Core profit in 2015 from its trading arm fell only 11 percent while profit from its mining and industrial business slid 38 percent.

    In October, Glencore narrowed its full-year 2016 earnings guidance from trading before interest and tax (EBIT) to $2.5 billion to $2.7 billion and on Thursday, Glencore said it should meet the upper end of that range.
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    Reuters carrying Ryan's tax plan.

    Republicans in the U.S. Congress hope to convince President-elect Donald Trump to support an untested strategy of using the tax code to promote exports while slashing corporate taxes, framing it as a way to fulfill his campaign promises to restore blue-collar jobs.

    The plan would be one way to help Republican lawmakers reconcile their long-standing goal of tax cuts with the often populist campaign rhetoric of Trump, who has attacked the North American Free Trade Agreement (NAFTA) and other trade deals as bad for U.S. workers.

    Critics say it risks running afoul of global trade rules and increasing costs for U.S. consumers. Analysts also say that any export gains could be short-lived if the strategy causes the dollar to strengthen, wiping out any price advantage for U.S. products in international markets.

    It is likely to undergo months of debate as part of a larger package of proposals offered in congressional Republicans’ “A Better Way” economic plan, but at least one Trump adviser already seems to have a favorable view of the export-focused "border adjustability" strategy.

    "If we have a border adjustable tax system, that can solve a lot of these trade issues that Trump is talking about," economic analyst and Trump adviser Stephen Moore said in an interview.

    “You’re going to tax what’s imported and not going to tax what’s exported. So we’re going to reduce the trade deficit and we’re going to have more companies come in here,” Moore said.

    Border adjustability's details are not clearly explained in a summary of the “A Better Way” plan from House Speaker Paul Ryan and House tax committee chairman Kevin Brady. But the Tax Foundation, a think tank that closely studies business tax policy, said the strategy would be implemented by making revenue from sales to non-U.S. residents non-taxable, while preventing importers from deducting the cost of goods bought from non-residents.

    Brady told Reuters that border adjustability would "virtually eliminate" any tax incentive for U.S. companies to move operations overseas and encourage foreign investment to return to the United States.

    "We’ve got a great argument, I think,” he said.

    Steven Mnuchin, Trump's pick for U.S. Treasury secretary and co-author of the president-elect’s tax plan, described tax reform on Wednesday as “something that happens absolutely within the first 90 days of this presidency.” Wilbur Ross, Trump's nominee for commerce secretary, did not mention tax policy directly but said the Trump administration’s aim would be to increase exports in part by getting rid of “non-tariff” barriers.

    The perceived winners under a border adjustability approach would include U.S. manufacturers that export heavily, while large-volume importers, such as U.S. retailers, could be hurt. That distinction was already dividing corporate lobbying groups.

    While retailers support an overhaul of the tax code, "the tax on imports proposed in the House blueprint is cause for concern for retailers," said Christin Fernandez, spokeswoman for the Retail Industry Leaders Association, a Washington group.

    The industry group's members include Wal Mart Stores Inc, Home Depot Inc and Target Corp.

    Some version of border adjustability could attract support from Democrats. Senator Ben Cardin, a Maryland Democrat who sits on the Senate Finance Committee and the panel’s tax subcommittee, said he strongly favors the idea. But he called the emerging House plan "very, very questionable" because it would use tax on corporate income rather than a consumption tax.

    Tax lawyers and other experts have said such an approach risks violating long-standing world trade rules that allow countries to adjust their trading positions through indirect taxes, such as a sales tax, but not with direct taxes like the U.S. corporate tax. "It would lead to uncertainty on how it would be treated internationally. And that’s bad for business," Cardin told Reuters.

    Trump's transition team and other Trump advisors on the economy did not respond to requests for comment.

    Brady has said border adjustability would pass muster with the World Trade Organization, which polices global trade. The WTO declined to comment on the plan.


    Border adjustability is only one component of the "A Better Way" blueprint. It would also slash the corporate income tax rate to 20 percent from a top rate of 35 percent; repeal the corporate alternative minimum tax; and let businesses write off capital investments immediately.

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    China manufacturing November PMIs better than seen by analysts

    China's economy continued to show signs of stabilization in November with two separate manufacturing surveys on Thursday pointing to better-than-expected growth.

    The official manufacturing Purchasing Managers' Index (PMI), which measures large state-owned factories, came in at 51.7 in November–matching the previous high in July 2014 and the highest since the 53.3 hit in April 2012.

    The official PMI was an improvement from 51.2 in October and beat Reuters analyst predictions of a 51.0 reading.

    The run-up in manufacturing came on the back of a government infrastructure stimulus plan and a property boom that spurred construction activity and steel prices.

    This in turn benefit industrial raw materials including coal used in steel-making, which saw an increase in output that likely helped the official PMI, ANZ economists wrote in a note.

    Notably, large producers of metal products and commodities benefited from a government-driven capacity reduction plan, pushing up the large enterprise PMI by 0.9 percentage point to 53.4 while the small enterprise PMI dropped by 0.9 percentage point to 47.4, noted the ANZ economists.

    This is reflected in the Caixin manufacturing PMI which fell to 50.9 from 51.2 in October, although the gauge also beat analyst forecasts of 50.8. The Caixin report focuses on mid-size companies not included in the official survey.

    Figures above the 50 level suggests expansionary activity while sub-50 levels indicate contraction.

    UBS Wealth Management's chief China economist Yifan Hu told CNBC's "Squawkbox" that she expected the economy to expand by 6.7 percent of 2016–within the government's 6.5-7.0 percent target range.

    "Recently, the whole economy stabilized and accelerated a little bit especially for manufacturing. With the rising of PPI (producer price index), upstream activity picked up very quickly, while downstream retail sales improved quite a lot," Hu said.

    China's October Producer Price index rose 1.2 percent in October to a near five-year high. October retail sales rose 10.0 percent in October on-year.
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    Brazil prosecutors blast lawmakers for gutting corruption bill

    Brazil prosecutors blast lawmakers for gutting corruption bill

    Prosecutors investigating Brazil's biggest-ever graft scandal threatened to resign en masse on Wednesday if a move to gut an anti-corruption bill won approval from legislators as the nation mourns an air disaster.

    The lower chamber of Congress passed the bill in the early hours of Wednesday morning by 450 votes to 1, with changes that would help shield lawmakers from prosecution and weaken the authority of public prosecutors.

    The vote came as Brazil grieves for soccer club Chapecoense following an air crash on Monday night in which 71 people died, including all but three of the team's players and several journalists.

    "In the dead of night, they took advantage of a moment of national mourning and shock to subvert the proposals," said Deltan Dallagnol, leader of the team of investigators probing a massive political kick-back scheme centered on state-run oil company Petrobras.

    Dallagnol accused the lower chamber of seeking to block Operation Car Wash as it comes close to incriminating a "significant number" of lawmakers in the Petrobras scandal.

    The anti-corruption bill originated in a petition signed by 2.5 million Brazilians frustrated at widespread graft.

    Prosecutors on the taskforce called a news conference to denounce the changes to water down the bill.

    "We plan to resign collectively if this proposal is signed into law by President Michel Temer," prosecutor Carlos Fernando Lima said.

    As Brazilians mourned the victims of the Colombian crash, lawmakers removed the legal definition of the crime of illegal enrichment and scratched a clause creating a reward and protection system for informants of corruption.

    Instead, they added penalties, including prison sentences, for abuses of authority committed by judges and prosecutors.

    Brazil's top prosecutor Rodrigo Janot said in a statement the changes were clearly aimed at "intimidating and weakening" the authority of prosecutors and the judiciary.

    The overwhelming support for the bill reflected concern over an impending plea bargain deal with the country's largest engineering conglomerate Odebrecht, in which executives are expected to inform on bribes paid to as many as 200 politicians in recent years.

    The bill still needs Senate approval. Critics of the changes are hoping Temer will veto the measures if it clears the Senate.

    Presidential spokesman Marcio de Freitas said Temer would only decide when and if it came to his desk. "The anti-corruption measures are still in Congress. We must wait to see what gets approved," he told Reuters.

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    Anglo American to exit stake in South African miner Exxaro

    British miner Anglo American Plc  said on Wednesday it would sell its stake in South African diversified miner Exxaro Resources Ltd  and use the proceeds to reduce debt.

    Exxaro's controlling black economic empowerment shareholder Main Street 333 Proprietary Ltd will also sell its interest in the miner, Anglo American said.

    Anglo American's stake of 9.7 percent, or 35 million shares, in Exxaro is valued at 3.39 billion rand ($240.62 million) based on Tuesday's close, while Main Street's holding equals 1.66 billion rand.
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    Israeli jets fired two missiles from Lebanese airspace toward the outskirts of the Syrian capital Damascus early Wednesday, the official Syrian news agency said, in a strike on an unknown target that caused loud explosions.

    The news agency, SANA, said the missiles struck the Sabboura area, west of Damascus, and did not cause any casualties.

    Damascus residents reported on social media hearing loud blasts around 2 a.m. The Israeli military declined to comment, but Israel is widely believed to have carried out a number of airstrikes in Syria in the past few years that have targeted advanced weapons systems, including Russian-made anti-aircraft missiles and Iranian-made missiles.

    The arms are believed to be destined for the Lebanese Shiite Hezbollah militant group, a close ally of the Syrian government and a fierce enemy of Israel.

    Israel has been largely unaffected by the Syrian civil war raging next door, suffering only sporadic incidents of spillover fire over the frontier that Israel has generally dismissed as tactical errors of the Assad regime.
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    China liquidity fears trigger exodus from steel to rubber

    An exodus of cash from steel to rubber to zinc threatened a blistering months-long rally across global commodity markets on Wednesday, triggered by fresh concerns about liquidity in China, the world's second largest economy.

    Retail and institutional investors scrambled to exit bullish bets and shore up cash amid government efforts to steady the sliding yuan currency and curb capital outflows.

    Coking coal futures and construction product steel rebar posted their biggest one-day falls on record, while Shanghai lead and zinc led steep falls across base metals and rubber dropped sharply.

    "Both longs and shorts are fleeing the commodities market," said Liu Xinwei, steel analyst at Sublime. "Capital is flowing into risk-free products, as the treasury bond prices fall and yields increase."

    Yuan borrowing costs surged after the central bank pulled funds from the financial system, making investments in commodities and equities more expensive and less attractive.

    Analysts said the selloff was long overdue after a months-long surge in steel and iron ore, China's largest commodity futures markets, which fed into a recent speculative surge in copper, zinc and lead.

    Shanghai copper hit 3-1/2-year highs earlier this month, while steel rebar futures touched their loftiest level since April 2014 on Tuesday.

    Still, the reversal was stunning in both its speed and size, reflecting the major role China's retail investors with an appetite for risk play in global commodity markets.

    Coking coal futures on the Dalian Commodity Exchange and steel rebar on the Shanghai Futures Exchange fell 8 percent and 7 percent respectively, while iron ore dropped 8 percent, one of its worst daily performances since the contract launched three years ago. [IRONORE/]

    Technical and computer-driven selling and book squaring ahead of the month and year-end added pressure for a second straight day of selling, after China's major commodity exchanges introduced new measures to tame the spectacular rally.

    Shanghai zinc and lead plunged 7 percent, while nickel, tin and copper slid 4 percent or more, dragging down London Metal Exchange metals.


    The selling wiped out some of the massive gains in base metals seen over the past few weeks fueled by hopes that U.S. President elect Donald Trump would bost infrastructure spending.

    A reduction in China's steel capacity along with robust infrastructure spending has fueled a 90 percent spike this year in prices of construction steel product rebar.

    Analysts said a reversal was long overdue as the scale of the rally driven by speculative cash was not justified by fundamentals.

    Demand for steel and copper in China, the world's top commodities market, from infrastructure and construction is relatively steady, but supplies are relatively robust.

    "If the cost of borrowing has gone higher, then obviously the bubble will come off a little bit," said Bonnie Liu, General Manager of GF Futures in Hong Kong.

    "Technically we probably will see further selling, but probably we will see buying into the dips will be the strategy for next year."
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    Europe 'can cope this winter' despite French nuclear squeeze: power grid group

    Europe has sufficient electricity generation capacity to meet normal and severe demand this winter "even if the situation in France will be tense," transmission system operator group Entso-e said Tuesday in its Winter Outlook Report 2016-17.

    The report assesses generation adequacy across 35 synchronously-connected electricity markets in continental Europe including Turkey.

    France is undergoing the lowest nuclear power availability in 10 years, with safety test decisions by French nuclear safety authority ASN leading to additional nuclear outages lasting for several weeks this winter, Entso-e said.

    Capacity margins in France "will decrease significantly in the first three weeks of December," with the country dependent on imports during this time. French adequacy risks then re-emerge in the second week of January if temperatures drop.

    "Adequacy risk is assessed at 4% in the Weeks 49 to 51 of December compared to 3% in Week 2 of January," it said.

    "Risk can occur in the event of cold waves at least 3 degrees C[elsius] below normal temperatures in December and 5 degrees C below normal temperatures in January," Entso-e said, noting up to 2.4 GW load sensitivity in France per 1 C fall in temperatures.

    French transmission system operator RTE had contracted emergency load reduction in place in case of shortages, the report said.

    "Moreover, RTE can drop the voltage for several hours by 5% to lower the load and to maintain adequacy," it said. "Eventually, in the worst and unlikely case, RTE could curtail load locally in a preventive way to secure the system." Furthermore, TSO coordination through Regional Security Coordinators would monitor generation adequacy "and address additional countermeasures at regional level that might be required to ensure a secure operation of the power system," the report said.


    Great Britain's adequacy might be affected by the French situation, with the UK needing high imports "from all neighboring countries," Entso-e said.

    Under extreme conditions Great Britain had additional capacity from open cycle gas turbines and pump-storage plants that it could call on, it said.

    "National Grid also expects there will be excess volumes of Short Term Operating Reserve (which can also be used," Entso-e said.

    Under normal conditions, Week 50 in Great Britain had the lowest forecast remaining capacity (1.49 GW). Under severe conditions, Week 3 had the lowest remaining capacity (-2.60 GW), the report noted.

    "This can be managed by imports from Interconnectors, Supplemental Balancing Reserve (SBR) and we would expect the market to respond as well," it said.

    Week 52 night times in Great Britain, meanwhile, had the lowest downward regulation capabilities (4.27 GW) due to low load around Christmas.


    For Germany the risk was of regulating oversupply, not undersupply of electricity.

    "The period around Christmas could be critical due to a massive oversupply of the German control area," the report said.

    "This could result in strong negative prices for electricity and could contribute to a high upward frequency deviation. In such an event, the German demand for negative control reserve might not be covered by the usually procured reserves," it said.

    Increased reserves would be procured and the ability to reduce wind output extended during this period. Exports would also ease oversupply at times of minimum demand. Nevertheless, on Sunday mornings when demand dips Germany expects "a great amount of excess generation" that will require TSOs to down-regulate renewable power surpluses.

    "In situations of high RES feed-in in the north and high load in the south of Germany, the need of remedial actions is expected to maintain (n-1) security on internal lines and on interconnectors," the report said.

    While high levels of German nuclear outages were foreseen at the end of the year/beginning of next year, no critical situations were forecast due to general oversupply.

    Finally at the European level, a joint analysis with gas transmission group Entsog had shown "the robustness of the European electricity system, even in the event of a high demand situation with a simultaneous interruption of gas transit through Ukraine," Entso-e said.


    Net generation capacity in Europe has increased by around 11 GW year on year, the report said, driven by growth in wind and solar (13 GW added), in hydro or other renewables (7 GW), and in gas plant (5 GW).

    While gas-fired capacity additions were up, however, total dispatchable capacity was down 14 GW year on year, potentially reducing the system's ability to respond to shocks such as the French outages.

    Recent S&P Global Platts' analysis shows that a trend in falling dispatchable capacity is set to continue for the next three years.

    Conventional plant margins in Northwest Europe are set to fall by 17.7 GW between 2016 and 2018, removing 7% of the region's controllable thermal capacity.
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    Australia home building boom fast turning to rubble

    Australia home building boom fast turning to rubble

    Australia is watching a much-needed boom in home building turn to rubble after approvals for new projects collapsed in October, a violent turnaround that could undermine policymakers' hopes for solid economic growth next year.

    Shock figures from the Australian Bureau of Statistics on Wednesday showed approvals to build new homes sank 12.6 percent in October from a month earlier, confounding forecasts of a 1.5 percent rise and the biggest drop since mid-2012.

    It was the third month of declines and brought the pullback since July to 22.5 percent.

    "Overall the update is unambiguously weak and puts a clear marker in the ground showing the construction cycle is now turning down," said Matthew Hassan, an economist at Westpac.

    Most of the damage came in the once high-flying apartment sector where approvals dived by a quarter in October alone, and were down more than 42 percent on the same month last year.

    That will be alarming news for the Reserve Bank of Australia (RBA), which has been counting on continued strength in home building to offset a lingering drag from a mining slump.

    Indeed, figures due next week had already been expected to show the economy all but stalled in the third quarter, and may even have shrunk - only the fourth negative quarter in 25 years.

    "Total approvals are still relatively high but the speed at which they are rolling over is a real surprise," said Shane Oliver, chief economist at AMP.

    "It already looks like the economy lost momentum in the third quarter and now residential investment could turn into a drag on growth next year," he added.

    "That only underscores our call for another rate cut next year."

    While the economy had been running at a brisk 3.3 percent in the year to June, that likely slowed closer to 2.0 percent for the year to September.

    The RBA has been playing down the need for further easing following cuts in August and May that took the cash rate to an all-time low of 1.5 percent.

    Policymakers argued that the massive drag from a slowdown in mining investment had almost passed, while a revival in prices for key commodity exports in recent months was set to boost national income.

    As a result, financial markets had all but given up on the chance of a further rate cut <0#YIB:> and were even toying with the idea of a hike late in 2017.

    "All talk of a hike is out the window after these building numbers," said Oliver.
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    China commodities, stocks slide as weak yuan spurs fears of liquidity squeeze

    China's stock markets fell and commodities prices plunged on Wednesday as government efforts to steady the sliding yuan currency and curb capital outflows added to fears of a liquidity squeeze in the banking system.

    Analysts said moves by China's central bank in recent days to shore up the yuan were sucking additional liquidity from the system even as banks and companies start to hoard cash as they typically do heading into the year-end.

    State-owned banks were seen selling dollars for a third consecutive day on Wednesday.

    That is pushing up borrowing costs, making investments in markets such as commodities and equities more expensive.

    Capital outflows spurred by the yuan's recent slide to 8-1/2 year lows in the face of a surging U.S. dollar are likely straining the system further, prompting authorities to intervene to steady the currency and discourage capital flight.

    "The stress could continue for a while," said Gu Weiyong, chief investment officer at hedge fund Ucom Investment Co, which specializes in fixed-income investment.

    "Whether the situation gets better depends on the willingness of the central bank to inject more liquidity into the system."

    Coking coal and steel rebar futures prices were on track for their biggest one-day drop on record as the costs of borrowing money. Investors also sold base metals to shore up cash.

    China's commodities prices had already been in sharp retreat after major commodity exchanges introduced further measures earlier this week aimed at taming a spectacular months-long rally which many suspect has been fueled largely by speculation.

    Short-term money rates spiked, while bond prices slid.

    Short-term borrowing costs in Shanghai continued to rise, with the overnight Shanghai Interbank Offered Rate (SHIBOR) climbing to 2.3160 percent, its highest since Sept.30.

    The overnight rate looked set to rise for the 15th session in a row.

    The seven-day SHIBOR stood at 2.4960 percent, the highest since last August, while the 3-month rate advanced to its loftiest level since mid-February.

    China shares also fell, with the blue-chip CSI300 Index down 0.7 percent and poised to snap a 7-day winning streak as raw material stocks weighed.

    An index tracking non-ferrous metals in Shanghai dropped roughly 1 percent, after slumping 4.1 percent on Tuesday, the biggest one-day fall in 16 months. Meanwhile, coking coal futures plunged over 7 percent.

    The volume-weighted average rate of the benchmark 14-day repo traded in the interbank market, a gauge of measuring general liquidity in China, shot to 3.6935 percent, the highest since January.

    Bond yields, which move inversely with prices, also rose.

    Benchmark 10-year treasury yields advanced to a five-month high of 2.943 percent, while 10-year treasury futures on Wednesday touched the lowest level since late April.

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    Glencore pivots from disposals to dividends as stock rallies

    Glencore fended off questions in 2015 about its survival as commodity prices hit new lows, and now there’s talk that the company’s turnaround plan has gone so well that it could be months away from paying dividends again. Surging coal and zinc prices, a rebounding stock price and shrinking debt pile made Glencore one of mining’s biggest success stories this year.

    CEO Ivan Glasenberg, who will provide an update on corporate strategy on Thursday, spent the past year ticking off items outlined in a crisis-induced debt reduction plan, including a goal to sell $4-billion to $5-billion in assets. The market rewarded him for it, with the stock tripling in 2016 and clawing back almost all of last year’s losses.

    Now, backed by a strong rebound in profits from its coal and zinc divisions, Glasenberg is in a position to pay back shareholders for supporting him through Glencore’s darkest days as a publicly traded company. None more so than Harris Associates’ David Herro, who placed the biggest wager on a Glencore recovery. The firm invested more than $2-billion at a time when others like Lansdowne Partners, one of Europe’s largest hedge funds, were betting big on further declines.

    “Job one is to continue to make sure that the balance sheet is strong and could withstand any kind of aggressive falls in commodity prices,” Herro, a portfolio manager at Chicago-based Harris, which is Glencore’s fourth-biggest shareholder with about a 5% stake, said in an interview with Bloomberg Television in London this month.

    “Then, selectively look at opportunities on how to use that free cash,” he added. “If there’s something that could be bought at a discount, at a good price, by all means look at it. But if not, there’s dividends, there’s share buybacks, there’s all kinds of other things.”

    Glasenberg and CFO Steve Kalmin may outline 2017 forecasts for spending, costs and production at Glencore’s investor day on Thursday, according to Credit Suisse Group. The company may also reveal a new dividend policy after skipping the last two payments to pay down debt, which stood at $30-billion last year.

    Booming prices for thermal coal and zinc, both up about 80% this year, are bolstering profits and provide a path for the return of dividends as early as March, according to UBS Group AG, which predicts it may pay 5 cents a share in March.

    Glencore may resume payments after the first half and start a new policy of returning 40% of net profits after tax to shareholders, said Alon Olsha, a mining analyst at Macquarie Group in London.

    “Glencore is now able to talk about restarting the dividend ahead of expectations,” Clive Burstow, who helps manage about $475-million of natural-resource assets at Baring Asset Management in London, including Glencore shares, said in an interview. “It’s because suddenly their cash-flowgeneration has been a lot stronger. We’ve arguably moved through the trough of the cycle.”

    Glencore hit a 16-month high on Nov. 11 of 292 pence in London, more than double the price from last year’s share sale. The company has also been buying back bonds, widening a program to $1.5-billion last month. The stock fell 1.1% to 281.6 pence at 9:42 a.m. local time, valuing the company at $50-billion.

    Investors are also looking for guidance on whether Glencorewill restore production at mines, especially in zinc, according to Olsha. Credit Suisse estimates that about 100 000 to 150 000 tons of the 500 000 tons of annual zinc output suspended will be brought back next year.

    Another potential use of surplus cash is acquisitions, though it would be premature to expect any big deals, said Burstow of Baring Asset Management.

    “I’d like to see another six to nine months of them carrying down the path that they are on,” he said. “Let’s get the dividend restarted, let’s see that the balance sheet is firmly in a much healthier place.”

    Glasenberg built Glencore through a series of acquisitions since taking on the CEO role in 2002. He led the strategy of twinning mining assets with the trading business, steering Glencore through a $10-billion initial public offering in 2011 and $29-billion takeover of Xstrata a year later to add mines and smelters.

    The last major deal undertaken by Glencore was the $1.4-billion takeover of Caracal Energy in Chad in 2014 that gave the company control of oil fields. The company has since written off most of the value of the business after energyprices slumped.
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    Mine ratings to become mandatory in India

    India’s Mines Ministry will make it mandatory for mines to get rated under the ‘five-star’ rating mechanism based on sustainability parameters, moving away from a self-regulatory model.

    According to a government official, the government is considering amendments to the Mineral Conservation and Development Rules to force all operational mines to make disclosures and submit details to the Indian Bureau of Mines (IBM), in a shift from the self-regulatory model adopted at the launch of the mine rating mechanism in July this year.

    An IBM official has explained that the country’s 1 800 operational mines have been slow in getting their mines rated. In fact, an IBM review into the causes of a poor response revealed that, given their existing parameters, only 700 of the total operational mines would qualify for the basic star rating.

    With a negligible number of mines coming forth voluntarily to get rated, IBM has started holding road shows across mineral-bearing provinces to coax mine operators into submitting details before the exercise will become mandatory.

    The star rating mechanism was introduced to allow communities and environmental organisations to assess how responsible mines are.

    The mechanism requires mines to submit detailed parameters on socioeconomic indicators at the mine location, best practices adopted under the United Nations SustainableDevelopment Framework and an environmental-impact assessment on a Web-based application to determine a mine’s star rating, from one to five stars, with five being the highest.

    Failure by a mine to improve its star rating for two subsequent audit periods will make the mine liable for closure.

    Government officials have acknowledged that the poor response to the rating system may be for reasons not entirely in control of mine owners. It was pointed out that several mines, particularly iron-ore mines could not be rated as many of them were not in operation for the minimum 180 days as mandated. For example a large number of iron-ore mines in Goa had remained closed for various reasons ranging from monsoon rains to delays in securing fresh environmentclearances after the Indian Supreme Court closed down all mines few years ago for violations of mining and environmental laws.

    However, given the slow pace of rating, the officials that Mining Weekly Online spoke to were not willing to guess whether the target to get all Indian operational mines to get a minimum four-star rating within the next three years would be met.
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    South Africa mine sector on a 'knife edge' due to political strife: Sibanye CEO

    South Africa's key mining industry is at risk of collapse due to political unrest and labor instability which have negatively impacted investment into the country, the chief executive of the nation's biggest gold company said on Monday.

    Political ructions in Africa's most industrialized country including scandals surrounding President Jacob Zuma for his alleged connections to the wealthy Gupta family have caused concern among investors, putting credit ratings at risk.

    The mining sector, which accounts for about 7 percent of GDP, has opposed the introduction of regulations and laws that could see the powers of the mining minister increase and social capital commitments of companies rise.

    "Right now is the worst sentiment I've seen from an investment perspective," Sibanye Gold's Neal Froneman told Reuters on the sidelines of the Investing in African Mining seminar in London.

    "It's just very clear, we sit on a knife edge as an industry - it could well collapse and that means it's unlikely that Africa's potential will be realized because resources will be sterilized."

    The Chamber of Mines, which represents most of the industry, has said it will take the government to court over the 2016 draft of the Mining Charter which requires companies to keep black ownership at 26 percent even if they sell their stake and raises procurement from black-owned companies.

    The Chamber also complains that the industry that was not consulted in the draft.

    The Charter contains regulations meant to redress imbalances of the nation's past apartheid rule and stipulates rules for white-owned companies to sell stakes to black businesses.

    "The government thought that they were the boss of the industry, but they are not. They have the job to regulate," Froneman said.

    In 2014, South Africa's main platinum producers were hit by a record five-month strike which was narrowly avoided this year.

    In addition to labor instability, governance is one of the main issues plaguing investor confidence.

    "Investors are dependent on safeguarding their investments through proper governance, if you have questions about a country's governance and poor corporate governance then investors simply won't invest," Froneman said.

    Ratings agencies Fitch and Moody's on Friday kept their ratings on South Africa unchanged but Fitch cut its outlook for the economy to negative, citing political risk and low growth as concerns.

    Zuma, who was also told by the Constitutional Court to repay some money related to upgrades to his home this year, now faces a vote of no-confidence from his own party with at least three of his cabinet ministers turning against him.
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    ENSO Conditions Favor the Return to More Typical US Winter Conditions,

    Triggering an Uptick in Electricity Demand Compared to Winter 2015-16

    Following Winter 2015-16's record-breaking warmth, the upcoming winter is expected to offer considerably more variability. Weak La Niña conditions should drive more sustained cold, particularly during the latter half of winter, resulting in stronger energy demand across much of the United States east of the Rockies.

    Winter 2015-16 Recap

    Winter 2015-16 started off on an exceptionally bearish note. December 2015 verified as the warmest on record, posting an incredible average national temperature anomaly of +6°F. January 2016 featured increased variability with warm anomalies retreating to the northern tier of the United States. A notable event was the January 22-24 blizzard that unleashed crippling snowfall totals in the Mid-Atlantic region. February 2016 closed meteorological winter on a warmer note, with warm anomalies overspreading the bulk of the major population centers. Despite this warmer shift, a transient yet powerful Valentine’s Day cold outbreak impacted the Northeast. Temperatures in Boston tumbled below zero with wind chills approaching -30°F, driving a sharp boost in energy demand.

    Winter 2016-17 Forecast Drivers and Key Risks

    One of the driving forces behind Genscape’s 2016-17 winter outlook is the expectation for a weak La Niña to persist through the winter months. Historically speaking, La Niña patterns correlate with below-normal temperatures across the northern U.S. along with above-normal temperatures across the southern U.S. Complicating this signal is the presence of anomalously warm Atlantic sea surface temperatures, known as a +AMO (Atlantic Multidecadal Oscillation), which correlates to warmer temperatures across a sizeable portion of the continental U.S.

    Due to the fact that very few analog years match the current distribution of sea surface temperatures in the Pacific and Atlantic, Genscape's analog years consist of a blend of these conditions. Among the top years used in this outlook are the winters of 1983-84, 2005-06, 2013-14, and 2014-15. These analog years favor back-loaded winter cold with a mild December, followed by increased coverage of below-normal temperatures from January into February and March. Below-normal North American snow cover to start winter along with the potential for a strong Pacific Jet Stream to persist pose warmer risks to Genscape's outlook. Additionally, a small subset of La Niña winters feature a substantially warmer look to February, adding risk that a back-weighted winter cold may underperform.

    East Coast (ISO-NE, NYISO, PJM)

    Generally below normal temperatures are expected across the East when looking at the winter as a whole. Despite the overall cold signal, it is expected to be a slow transition from the prolonged warmth experienced this fall. The December pattern looks to be volatile, with above-normal temperatures followed by brief cold snaps throughout the month, before the cold air outbreaks increase in both frequency and longevity for January and February. This leads to expectations of higher peak demand year-over-year for ISO-NE, NYISO, and PJM.

    Midwest and Lower Mississippi Valley (MISO)

    The Upper Midwest is expected to be the focus for colder-than-average temperatures as the winter unfolds this year. While the winter is expected to be volatile, colder-than-average temperatures are expected to take time to develop. MISO peak demand expectations are significantly higher (7.5 percent) than last year’s weak winter peak. Significant cold is expected to hold off until January, and the winter peak is expected to occur during the second half of the month as cold deepens heading into February. The South is expected to remain closer to seasonal temperature levels through the winter, which should keep MISO demand from reaching the all-time winter peak levels seen in January 2014.

    Plains (SPP, ERCOT)

    After experiencing an exceptionally warm winter last year, the upcoming winter is expected to offer colder temperatures and more pattern variability. This should lead to stronger year-over-year demand for both ERCOT and SPP. More specifically, Genscape's peak winter load forecast for ERCOT and SPP calls for year-over-year demand increases of 7.5 percent and 5.1 percent, respectively. While winter is expected to get off to a rather slow start in December, an increasingly amplified Polar Jet Stream should bring more sustained cold to the Plains from January into February. Forecasts risks generally lean warmer across the Southern Plains, including ERCOT, if a more pronounced warm La Niña signal becomes established.

    West (CAISO, WECC)

    While most of the country anticipates a bearish start to Winter 2016-2017, CAISO begins the season with an anomalous cold pattern with peak heating demand occurring in the first half of December. In contrast to last year, weak La Niña shifts the subtropical jet into Northern California and the Pacific Northwest, where a continuation of anomalous fall 2016 precipitation continues through December. Warm anomalies then return to California by late December and persist through the end of winter. Healthy water and snowpack levels return to Northwest Hydro after a record-setting fall, with seasonal conditions returning through winter.  

    In summary, Winter 2016-17 will offer a much colder outcome than Winter 2015-16. Cold temperature anomalies will be focused across portions of the Upper Midwest, Great Lakes, and Northeast, with warm anomalies stretching from the Desert Southwest northward along the West Coast. Above-normal precipitation is expected along the Eastern Seaboard, resulting from an active storm track. Meanwhile, below-normal precipitation is forecast for portions of the Desert Southwest into Southern California.

    Weather can have a large impact on power demand and generation, especially with the seasonal extremes seen across the U.S. in the summer and winter months. Being able to anticipate weather patterns for the season ahead can help market participants make more informed trading or business decisions. Click here to learn more about the full range of

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    Kuwaiti opposition win big in anti-austerity vote

    Opposition candidates are estimated to have won around 20 seats out of 50 in Kuwaiti elections that saw most parliament members replaced, in a vote analysts said reflects anger at austerity measures to curb a budget deficit.

    The results of Saturday's vote are likely to make it harder for the government to work with the new assembly to pass further reforms.

    State news agency KUNA said that 30 new MPs gained seats in the 50-member parliament, including several younger men and one woman, after a turnout estimated at around 65 percent for the Gulf's most outspoken legislature.

    Analyst Ibrahim al-Hadban said the election campaign had shown that some of the decisions taken by the government were not popular among citizens, including raising gasoline prices.

    "MPs who were in the assembly did not object to these decisions. So, in my view, they were blamed and punished," Hadban, who teaches political science at Kuwait University, told Reuters.

    With no political parties, it was difficult to pin down precisely how many opposition MPs had been elected. But some estimates put the number at between 17 and 24.

    The opposition, including the Muslim Brotherhood, liberals and pan-Arabists, had boycotted the election in 2012 to protest against changes to election laws they saw as favouring pro-government candidates.

    At least two cabinet members failed to win parliament seats this time, apparently an indication of popular discontent with the government's austerity plans.

    The parliament of Western-allied Kuwait had been due to run until July 2017, but the emir, Sheikh Sabah al-Ahmad al-Sabah, dissolved it in October, saying "security challenges" in the region - an apparent reference to wars in Iraq and Syria - should be met by consulting the popular will.

    More than 290 candidates, including 14 women, were standing in an assembly that enjoys legislative powers but has often been at odds with the government of Kuwait, one of the world's wealthiest countries, thwarting attempts to strengthen fiscal discipline.

    Former speaker Marzouq al-Ghanem, who retained his seat, said political stability was crucial for Kuwait to focus on economic development in what he described as a "sensitive, critical and important stage".

    "As I pointed out to all political blocs, progress or development must have a base and the base is political stability," Ghanem told Reuters after polls closed on Saturday night.

    Campaigning had focused mainly on austerity measures adopted in the past year after officials forecast a deficit of 9.5 billion dinars ($31 billion) for the 2016/17 fiscal year. The OPEC state relies on oil for about 90 percent of its revenues.

    Although the deficit is likely to be smaller than forecast as it was based on an oil price of $25 a barrel, many Kuwaitis fear the government will try to raise prices further and cut many of the perks they have enjoyed for decades. These include free health care, education, subsidized basic products, free housing or land plots and interest-free loans for many citizens.
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    Brazil's New President Temer Threatened With Impeachment After New Corruption Scandal Emerges

    Six months after Brazil's former president Dilma Rouseff was removed from power as a result of a carefully orchestrated process by her former Vice President, Michel Temer, who as many suggested at the time, was merely trying to shift attention away from himself and to his former boss due to his "checkered past", swirling with allegations of corruption on par with those of the deposed president, Temer himself may be in danger of impeachment when overnight, Brazil's public prosecutor announced it was studying a possible investigation into whether President Michel Temer put pressure on a former minister to favor a Cabinet colleague's property investment.

    Marcelo Calero, who resigned last week as culture minister, told federal police that the president pressured him to resolve a dispute with another Cabinet member, Geddel Lima, president Temer's top government congressional liaison, who was seeking a permit for an apartment building in a historic preservation area of his hometown, a federal police source said.

    Calero's accusations have set off new crisis for Temer for allegedly using his public office to obtain a permit for the luxury oceanfront building in the city of Salvador.

    Following the news, the Brazilian real slumped as much as 2.2% to 3.4679 reais to the dollar, the biggest intraday drop since Trump's unexpected victory. Traders cited concern that the controversy could derail an overhaul of government finances favored by investors. Simiarly, Brazil's main stock market index, the Bovespa, fell 1.3 percent on concerns of continued political uncertainty delaying recovery from the country's worst recession since the 1930s
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    Hundreds Arrested in Hebei Pollution Crackdown

    According to the Ministry of Environmental Protection Web site news, Hebei recently informed of 6 cases of environmental protection accountability typical of the 487 responsible persons serious accountability, of which four department-level cadres, cadres at the level of 33 people.

    Hebei Provincial Party Committee and Provincial Government on the Central Environmental Protection Inspectorate Group transfer of clues to set up a special investigation and accountability work leading group, responsible for the 487 serious accountability, including four department-level cadres, cadres at the level of 33, And the following cadres 431 people, the main person in charge of business 7, 12 other enterprise management personnel, to the party discipline and discipline disciplinary action 294 people, admonish 117 people, dismissed or transferred from 10 people, transferred to the judiciary 5 people.

    Of these, 6 are typical cases:

    1, the Provincial Office of the Office of Industry and Commerce Office of Monitoring and Coordination, the Provincial Environmental Protection Bureau of the total amount of pollutant emissions control and supervision is not in place, not strict, resulting in the sintering machine should be out of the violation found and be retained. Provincial Environmental Monitoring Center Station Party Secretary (Provincial Environmental Protection Bureau of the total amount of pollutant emissions control of the former Deputy Director) Ma Yongxian, the Provincial Department of Industry Office of the Deputy Director of Monitoring and Coordination Gao Linhai, Wu'an City Environmental Protection Bureau Deputy Director Zhang Jixing 7 were Giving administrative records, administrative warnings, admonishing remarks, informed criticism. Li Bao, deputy director of the Provincial Environmental Protection Department transferred to the judiciary for criminal responsibility.

    In 2, the deep state party secretary Sun Yunxia any city mayor during the mayor, presided over the mayor of office, beyond the approval of approval by the National Development and Reform Commission approved Yangzhou Chemical Group Co., Ltd. Yangzhou annual output of 220,000 tons of ethylene glycol project . Sun Yunxia and other six people were given a serious warning within the party, the party warnings, administrative punishment in mind.

    3, Tangshan City, four ferroalloy projects did not complete the required capacity replacement, Tengda company with a false capacity replacement letter to cheat EIA approval, Caofeidian District Government Office Deputy Director Meng Xiangzuo, government office secretary of a branch staff Zheng Wei suspected forged nickel-iron alloy Project capacity replacement letter, Guye District Development and Reform Bureau of the Dingxiang company reported the capacity transfer agreement is not organized to verify the gate, Laoting County Government Inspection Office of the dry billion companies to submit the nickel-iron alloy production capacity alternative program reported unconfirmed Tangshan City Development and Reform Commission Industry Coordination Office of the relevant projects without verification report, resulting in the replacement of the relevant project capacity is not real problem. On the Tangshan City Development and Reform Commission Industrial Coordination Branch Director Bian Mingjiang, Guye District Development and Reform Bureau Director Hao Demin, Laoting County, deputy director of the government inspection office, deputy director of the Office of the Government and the branch director Zhang and other 6 were given administrative in mind Administrative records, administrative warnings. Meng Xiangzuo, Zheng Wei, Tengda company suspected of fraudulent transfer of public security departments to deal with.

    4, State Power Baoding Northwest suburb of thermal power plant project coal consumption equivalent alternative and Mancheng County paper products processing zone cogeneration project coal equivalent alternative reporting process, the provincial Development and Reform Commission Energy Conservation Monitoring and Monitoring Center and Baoding City, Mancheng District Development and Reform The department did not seriously verify, resulting in two projects in the same amount of alternative programs in some of the boiler to replace the repeated problems. The provincial energy conservation supervision and monitoring center of the legal supervision room director Tian Lijun, Baoding City Mancheng District Development and Reform Bureau party secretary, the Secretary Feng Liang and other seven were given administrative records, administrative warnings, admonishing conversation. Baoding City Development and Reform Commission former director Zhang Lijuan case transferred to the judiciary for criminal responsibility.

    5, Tangshan Iron and Steel Co., Ltd. Hebei Branch of the implementation of blast furnace ex situ modification project, without approval, started construction of a 1580m3 blast furnace project. On the Hebei Iron and Steel Co., Ltd. Tanggang Branch Chairman, Party Secretary Wang Lanyu and other 5 were given administrative warnings, admonishing remarks, informed criticism.

    6, Hebei Iron and Steel Co., Ltd. Handan Iron and Steel Branch did not press the Ministry of Environmental Protection approved the elimination of 900m3 blast furnace and 90m2 sintering machine. On the Hebei Iron and Steel Co., Ltd. Handan Iron and Steel Company chairman, party secretary Guo Jingrui and other five people were given administrative warnings, admonishing remarks, criticized.
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    The Great Climate Fraud.

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    3D Printing a house, or a car, or a human organ.

    Watch this giant 3D printer build a house | WIRED UK 21 Sep 2015 - This 3D printer is big enough to build houses. Created by Italian engineering company WASP, the project has aspirations to solve the global ...

    World's first 3D printed house is completed after just 45 DAYS in ... › News › World news › House prices27 Jun 2016 - The first 3D-printed house in the world has been completed and unveiled in China where experts are leading an architectural revolution.

    Chinese Construction Company 3D Prints an Entire Two-Story House ... 16 Jun 2016 - Obviously it depends on the size of the house and other factors, but ... construction by 3D printing a 400-square-meter, two-story house in a ...

    3D-printed house in China can withstand an 8.0 earthquake | Inhabitat ... 28 Jun 2016 - 3D printers started small, but now companies are printing entire homes – and a Chinese company just created an entire mansion in 45 days!

    How Dutch team is 3D-printing a full-sized house - BBC News 3 May 2014 - Architects in Amsterdam have started building what they say is one of the world's first full-sized 3D-printed houses.

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    Oil and Gas

    Saudi share of China's oil imports keeps falling

    In October 2013, the kingdom had a 22 percent share of crude imports in China. Nowadays, it's been overtaken by Russia, and has Iraq and Iran nipping at the hem of its dishdasha.

    That dynamic is only likely to accelerate as a result of Wednesday's OPEC meeting. Almost all the cartel's members agreed to cut output by a fairly uniform 4.6 percent below reference levels. The glaring exception was Iran, which will be allowed to boost production 2.3 percent. The 300,000 barrel-a-day reduction promised by Russia, a non-OPEC member, is likewise a modest 2.7 percent below current levels.

    All things being equal, that's likely to accelerate China's trend toward a broader base of crude supply. In 2013, Saudi Arabia and Angola together accounted for 33 percent of the country's imports. The kingdom's 11.8 percent import share in September was the lowest figure since 2005; Angola's 8.5 percent slice last month was the smallest since 2007.

    Meanwhile, other Gulf producers have been catching up. Iraq briefly overtook the kingdom in September with 4.1 million metric tons of exports to China, compared with Saudi Arabia's 3.9 million. Iran, with 3.3 million tons, wasn't far behind.

    That's good news for Tehran, which could do with a diversity of customers, given the risk that a Trump administration manages to stymie oil exports to Europe, as Gadfly's Julian Lee has argued.
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    Inside FERC Henry Hub December index rises 46 cents to $3.23/MMBtu

    Inside FERC Henry Hub December index rises 46 cents to $3.23/MMBtu

    The December bidweek national average natural gas price rose 70 cents to $3.17/MMBtu, with prices in the US Northeast seeing the biggest increases, according to Inside FERC's Gas Market Report Thursday.

    The December bidweek price at benchmark Henry Hub rose 46 cents to average $3.23/MMBtu.

    That came as the NYMEX December gas futures contract expired at $3.232/MMBtu, up 46.8 cents from the November contract's close of $2.764/MMBtu.

    In the Northeast, Transcontinental Gas Pipe Line Zone 6 New York increased $1.96/MMBtu to average $3.87/MMBtu as expectations for colder temperatures and stronger heating demand drove prices higher.

    In premium New England markets, prices rose even more sharply as Algonquin Gas Transmission city-gates prices climbed $2.27 to $4.73/MMBtu.

    In the Northeast producing regions, Dominion, Appalachia December prices climbed $1.28 to $2.40/MMBtu.

    In the Upper Midwest, prices advanced, with Chicago city-gates rising 44 cents to average $3.25/MMBtu. Upstream, Rockies Express Zone 3 prices climbed 50 cents to $3.21/MMBtu.

    In the Midcontinent, December prices saw similar increases as the Panhandle pricing point rose 50 cents to average $3.04/MMBtu.

    Further west in the Rockies, Northwest Pipeline Rockies was up 37 cents to average $2.99/MMBtu.

    Along the West Coast, Southern California Gas December prices jumped 71 cents to $3.41/MMBtu.

    Elsewhere in the region, Pacific Gas & Electric city-gates climbed 31 cents to average $3.56/MMBtu.
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    Italy to receive first U.S. LNG cargo?

    Italy is about to receive its first cargo of U.S. LNG produced from shale gas, at least that it is what the ship tracking data currently shows.

    This would be only the fourth U.S. cargo to land in Europe since Cheniere’s Sabine Pass liquefaction facility started exporting the chilled fuel at the end of February.

    According to AIS data provided by the vessel tracking website, MarineTraffic, the 156,007-cbm WilPride is expected to deliver a Sabine Pass cargo to FSRU Toscana located off the Italian coast between Livorno and Pisa on December 4.

    Cheniere’s Sabine Pass facility has since February shipped more than 40 cargoes produced from two liquefaction trains with most of them landing in Latin America followed by Africa, Asia, and Europe.

    The U.S. is expected to become the world’s third-largest LNG supplier by 2020 with an export capacity of 60 million mt coming from five terminals located along the Gulf Coast.
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    WildHorse Resource Development Corp. launches IPO

    WildHorse Resource Development Corp., a Houston-based independent oil and natural gas company, has launched an initial public offering, the company announced Thursday.

    The shares are trading on the New York Stock Exchange under the symbol “WRD.” WildHorse is offering 27.5 million shares of common stock and underwriters get a 30-day option to purchase more than 4.1 million additional shares.

    Book-running managers for the offering are Barclays, Bank of America Merrill Lynch, BMO Capital Markets, Citigroup and Wells Fargo Securities, according to a company statement.

    WildHorse develops properties for oil and natural gas production across the Eagle Ford Shale region of Texas and the Cotton Valley region of northern Louisiana.
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    Energy East the Odd Pipeline Out as Canada Approves Two Others

    For more than two years, TransCanada Corp.’s proposed 1.1 million barrel-a-day Energy East pipeline, designed to run from Alberta to New Brunswick, has been mired in regulatory hearings and opposition from environmentalists. Now, the hurdles it faces may be even higher after Kinder Morgan Inc.’s Trans Mountain expansion and Enbridge Inc.’s Line 3 replacement were both cleared for operation by the Canadian government on Tuesday.

    When combined with U.S. President-elect Donald Trump’s promise to quickly approve the Keystone XL pipeline, Trans Mountain and Line 3 will add enough capacity to handle Canada’s oil production for 20 years, according to National Energy Board projections. That makes Energy East redundant, according to Steve Belisle, a fund manager at Manulife Asset Management in Montreal.

    “It’s becoming an even more remote possibility that Energy East goes ahead,” Belisle said in a telephone interview. “Why go through the political hassles at this stage. I don’t think that TransCanada has a lot of appetite for this.”

    Extending Trans Mountain to the British Columbia coastline and expanding Line 3, which carries crude to the U.S. Midwest, will add 960,000 barrels in capacity a day. TransCanada’s Keystone XL pipeline to the Gulf Coast is designed to carry 830,000 barrels a day.

    Expand Access

    TransCanada applied to build Energy East two years ago as Canadian oil producers looked to expand access to markets beyond the U.S., where nearly all Canada’s oil is sold and where a surge of shale oil production depressed prices. The aim was to open access for Western Canadian oil producers to the Atlantic Ocean, allowing Alberta’s crude to be sold in Europe.

    Slated to cost C$15.7 billion ($11.9 billion), the line would have been the largest in North America carrying oil. It faced an uncertain future after National Energy Board reviewers assessing the project stepped down in September amid allegations that the regulatory process was tarnished, and after violent protests forced a halt to hearings.

    Still, TransCanada remains committed to the project, Tim Duboyce, a company spokesman, said in an e-mail Wednesday.

    “Energy East remains of critical strategic importance because it will end the need for refineries in Quebec and New Brunswick to import hundreds of thousands of barrels of foreign oil every day, while improving overseas market access for Canadian oil,” Duboyce wrote the day after Canadian Prime Minister Justin Trudeau announced the Trans Mountain and Line 3 approvals.

    Added Capacity

    Enbridge’s C$7.5 billion Line 3 replacement is scheduled to go into operation in 2019, allowing the company to restore the pipeline’s original 760,000 barrel-a-day capacity after it was cut by almost half in 2010. Kinder Morgan filed to expand Trans Mountain three years ago, seeking to almost triple its capacity to 890,000 barrels, and allowing increased exports to Asia.

    While Energy East could still be approved after Tuesday’s decision, it “may take a bit more time” and require the holding of provincial elections in Quebec, said Tim Pickering, a founder at Calgary-based Auspice Capital Advisors. Pickering said he believes the pipeline should be approved “in the interest of Canada’s energy security. We are selling oil at such a great discount because we have one buyer for our oil,” he said.

    In December last year, TransCanada increased the projected cost after addressing the concerns of communities and making almost 700 route changes. The company also eliminated a proposed marine export terminal in Quebec amid concern the facility would harm endangered beluga whales.

    Opposition remains nonetheless. In September, Quebec’s Premier Philippe Couillard said in an interview that Energy East poses significant risk to the provinces freshwater resources. “We will not compromise our people’s security and safety as far as water is concerned,” he said.

    Attached Files
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    BP says approves Mad Dog oil field extension in Gulf of Mexico

    Oil major BP has approved a $9-billion (7.13 billion pound) investment to expand its Mad Dog oil field in the U.S. Gulf of Mexico, the company said, adding to just a handful of investment decisions it has taken this year amid weak oil prices.

    The Mad Dog Phase 2 project will start producing oil in late 2021 and will have the capacity to pump up to 140,000 barrels per day (bpd) from up to 14 wells, BP said.

    A leaner design of the expanded Mad Dog, which is located around 190 miles south of New Orleans, means the project's costs have fallen to $9 billion from more than $20 billion initially.

    BP said its project partners BHP Billiton and Chevron are expected to made a final investment decision on the field soon.
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    Israel: Noble Energy sells more Leviathan gas

    U.S. oil and gas firm Noble Energy has managed to find another buyer for the Leviathan field gas.

    According to Delek, Noble’s partner in the project located in the Mediterranean Sea offshore Israel, the Leviathan partners have signed a deal to sell gas from the Leviathan to Or Power Energies (Dalia).

    The buyer will use the gas to operate a power station that it intends to set up, Delek said on Thursday.

    Under the deal signed on November 30, the Leviathan partners will supply the buyer with an overall amount of 8.8 billion cubic meters of natural gas.

    The agreement starts when commercial volumes of natural gas start to flow from the Leviathan field to the Or Power Energies (Dalia).

    As for the value of the contract, the Leviathan partners that the amount could come to around $2 billion, however “the actual revenues will be derived from a range of factors, including the amounts of gas actually purchased by the purchaser and the electricity production price.”

    Worth noting the deal is subject to several contingent terms, the main ones of which are receipt of a license for the natural gas pipeline from the Leviathan field, a Final Investment Decision by the Leviathan Partners. Additionally, Or Power needs to obtain a conditional license to produce electricity and the applicable approvals of the planning authorities for the construction of its installations. The deal is also dependent on financial completion of  Or Power’s funding agreements.

    As for the Leviathan field sanction, Noble Energy, the operator, in November said it had made progress towards the Final Investment Decision. The FID is now expected in early in 2017.

    To remind, during the third quarter, Leviathan partners signed a large sales contract to sell gas from Leviathan to Jordan’s to the National Electric Power Company Ltd. (NEPCO).

    The Leviathan development plan envisions a subsea system that connects production wells to a fixed platform located offshore with tie-in onshore in the northern part of Israel. The fixed platform’s initial capacity is anticipated to start at 1.2 billion cubic feet of natural gas per day (Bcf/d) and is expandable to 2.1 Bcf/d.

    The field is estimated to hold some 22 Tcf of recoverable gross natural gas resources.
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    Iraq oil exports hit record 4.051 million bpd in November

    Iraq's oil exports reached a record high 4.051 million barrels per day (bpd) in November, the oil ministry said in a statement on Thursday.

    Exports from the country's southern oilfields totalled 3.407 million bpd, the ministry said. Kirkuk exports amounted to 64,000 bpd, with 580,000 bpd exported from oilfields controlled by the Kurdish regional authorities in the north, it said.
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    Dispatch From Vienna Crude Realities & OPEC’s Half Real Deal

    OPEC pulled a rabbit out of its hat and produced a cut plan that is half real. Nearly every minister on Tuesday was privately very grim about the prospects for a deal.

    So what changed?  Iran agreed to a freeze but will maintain it is not a freeze. And more significantly, Russia pledged it would cut production instead of its prior position to just freeze. The Saudi's privately admit that Iran is at peak production in the short term but Saudi views Russia as its chief competitor for market share. There would not be a deal without Russia.

    The OPEC agreement announced was to cut production by 1.2 Mbd to a ceiling of 32.5 Mbd.  In our view, we think you can only count on cuts from Saudi Arabia (-486), Qatar (-30), Kuwait (-131) and UAE (-131) so the real cut is about 786 Kbd. Not insignificant.

    Moreover, the OPEC President said the deal was "contingent" on non-OPEC cuts of 600 Kbd although the written agreement is silent on the very specific language used in the press conference. He said Russia would do half of that amount at 300 Kbd but advised the press corps to look for a coming press conference in Moscow for more details. Platts is reporting tonight that the Russian energy ministry said it would “gradually” work up to 300 Kbd in cuts so the deal is already on shaky ground. It’s not clear where the other 300 Kbd comes from since no further details were announced.

    OPEC will meet with other non-OPEC producers on December 9 in Doha to discuss the non-OPEC commitment. We are sure they will cobble together an announcement of 600k from non-OPEC but we think this number and, especially the Russian amount, are the weak links in the deal. We think the entire 600 Kbd is dubious.
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    Iran floating storage falling ‏


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    Russia’s Pledge to OPEC Will Mean ‘Herding Cats’ to Deliver Cuts

    Russia has committed to cooperate with OPEC by cutting as much as 300,000 barrels a day from its oil output but offered no clear method for enforcement, creating uncertainty about how easily the reduction can be delivered.

    Output cuts should be spread proportionally between Russian producers, who have said they support the move, Energy Minister Alexander Novak told reporters Thursday. Yet no oil companies have so far taken the lead on explaining how they will implement the cuts, said Chris Weafer, a partner at Macro Advisory. State-controlled Rosneft PJSC is likely to bear most of the burden, according to Renaissance Capital.

    “Trying to get an agreement for a pro-rata cut amongst the Russian oil producers, even if mandated by the Kremlin, would be akin to herding cats,” Weafer said by e-mail Thursday. “All would want to wait to see what the others do first.”

    The Organization of Petroleum Exporting Countries confounded skepticson Wednesday by reaching an agreement to cut production by 1.2 million barrels a day. Russia added to the surprise by saying it too would reduce current output of 11.2 million barrels a day -- a reversal for Novak who had for months expressed Russia’s preference for freezing at that level. While crude futures jumped above $50 a barrel on the news, questions remain over how the supply curbs will be implemented.

    Lukoil PJSC Russia’s second largest producer, supports OPEC’s moves to stabilize global oil markets, Pavel Zhdanov, the company’s director of capital markets and mergers and acquisitions, said on conference call Wednesday. It is too early to get into details, he said.

    The press services of Rosneft, Russia’s largest producer, and Lukoil declined to comment on any measures they would take to enact cuts.

    Rosneft’s Burden

    “Rosneft looks like the number one company that should take the biggest share of the cut,” Ildar Davletshin, an oil analyst at Renaissance Capital, said by e-mail. It controls almost 50 percent of Russian oil output and it has one of the lowest shares of so-called greenfields, or new developments, in its current production portfolio, he said.

    Cuts are more likely to be achieved by dialing back drilling on older fields, allowing the natural decline rates to grow, as opposed to stopping new projects, he said.

    An output reduction spread proportionately among large companies won’t result in changes to overall levels of investment in the industry, Olga Danilenko, director of oil and gas research at Prosperity Capital in Moscow, said by e-mail. Instead, they would probably shift funds to longer-term projects, she said.

    Russia plans to meet with OPEC producers and nations from outside the group in the next 10 days, during which the country will likely sign a memorandum confirming the supply reductions, Novak said in a briefing Wednesday.
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    Novac says 300,000 cut will be gradual

    Russia oil min Novak says 300Kbpd cut from Nov/Dec levels to be gradual. Cut leaves output at March 2016 levels.

    Russia plans to cut its oil output from November-December levels as a part of its agreement to stabilize global oil market together with OPEC, Energy Minister Alexander Novak told reporters on Thursday.

    Novak said a day earlier Russia was ready to cut oil production by up to 300,000 barrels per day in the first half of 2017 as a part of its agreement with OPEC.

    "It will be an equal approach, an equal cut by all (Russian) companies, but we will work out (details) additionally... In general, there is an understanding that this (cut) should be equal in percents for all," Novak said. He did not elaborate.

    Rosneft is Russia's top oil producer, followed by Lukoil, Surgutneftegaz and Gazprom Neft. Rosneft and Gazprom Neft declined to comment, while Lukoil and Surgut did reply to Reuters requests seeking a comment.

    Russia's oil output set a new post-Soviet era record high in October, rising 0.1 percent from September to 11.2 million barrels per day (bpd).

    Attached Files
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    Egypt delays third FSRU

    Egypt has decided to postpone plans to charter a third floating regasification unit (FSRU), the Al Borsa newspaper reported on Thursday citing Petroleum Minister Tarek El Molla as saying.

    The third FSRU that will be used as an import terminal was expected to arrive at the end of June next year to handle a surge in LNG demand from new power plants coming online.

    However, these plans have been delayed as results of a reevaluation of natural gas projects that will supply the power grid showed that the domestic market did not need to increase the imports of gas next year, the report said.

    The Minister did not reveal how long the arrival of the third FSRU would be delayed.

    The Egyptian Natural Gas Holding Company (EGAS) had already held a tender earlier this year for the FSRU. Companies that expressed interest in providing the regasification unit included Höegh LNG, BW, and  Excelerate Energy.

    Egypt, which turned from a net exporter to a net importer, started importing the chilled fuel in April 2015 via FSRU Höegh Gallant located in Ain Sokhna Port. FSRU BW Singapore, used as Egypt’s second LNG import terminal in Ain Sokhna, began operations in October last year.

    The country recently selected its suppliers for about 60 cargoes of the chilled fuel it sought for 2017-18 through what was claimed to be the largest mid-term tender ever issued.

    Attached Files
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    India to invest $20bn in deepwater fields

    India is to invest $20billion in gas fields in the next five to seven years, according to its oil minister Dharmendra Pradhan.

    The politician said the investment will be primarily in developing natural gas discoveries by state-owned ONGC and Reliance Industries joint venture with BP.

    He said: “About $20billion will be invested in next five to seven years primarily in deepwater fields to augment gas production.

    “We are now expediting production of gas from domestic sources to the extent of 20 trillion cubic feet from already discovered sources through policy, fiscal and regulatory mechanism.

    “These fields and the current auctions of discovered small fields are going to add to the domestic supplies in the next three to four years.”

    At the moment, ONGC is lining up $5.07billion to produce more than 16million standard cubic metre per day of natural gas from a set of discoveries in its Krishna Godavari basin.
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    Magnolia LNG granted non-FTA export approval

    Perth-based LNG Limited on Thursday said its Magnolia LNG project has been granted authorization by the U.S. Department of Energy to export liquefied natural gas to non-FTA countries.

    Greg Vesey, LNG Limited managing director and CEO said that the authorization to export the chilled fuel from the proposed facility in Lake Charles, Louisiana to countries with which the United States has not entered into a free trade agreement was the final piece of regulatory framework for the project.

    Magnolia LNG has already been granted authorization to site, construct and operate the liquefaction and export terminal in April.

    Vesey added that the company is well underway in progressing on the final offtake milestones to enable it to move the project into the construction and operations phases.

    The proposed Magnolia LNG facility would have up to four trains each with a liquefaction capacity of 2 mtpa or more, two 160,000-cbm storage tanks, ship, barge and truck loading facilities and supporting infrastructure.
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    Summary of Weekly Petroleum Data for the Week Ending November 25, 2016

    U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending November 25, 2016, 114,000 barrels per day less than the previous week’s average. Refineries operated at 89.8% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging over 5.2 million barrels per day.

    U.S. crude oil imports averaged over 7.5 million barrels per day last week, down by 30,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.7 million barrels per day, 5.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 851,000 barrels per day. Distillate fuel imports averaged 174,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.9 million barrels from the previous week. At 488.1 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.1 million barrels last week, and are well above the upper limit of the average range. Both Finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 5.0 million barrels last week and are well above the upper limit of the average range for this time of year.

    Propane/propylene inventories fell 1.9 million barrels last week but are near the upper limit of the average range. Total commercial petroleum inventories increased by 0.5 million barrels last week. Total products supplied over the last four-week period averaged over 19.8 million barrels per day, up by 1.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.2 million barrels per day, up by 0.1% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 4.1% from the same period last year. Jet fuel product supplied is up 6.3% compared to the same four-week period last year.

    Cushing rises 2.4 mln bbl
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    Small rise in US oil production

                                                    Last Week  Week Before  Last Year

    Domestic Production '000.............. 8,699           8,690          9,202
    Alaska ................................................... 522              511            529
    Lower 48 ........................................... 8,177            8,179           8,673
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    Oil prices surge, smash trading volume records as OPEC and Russia agree output cut

    Oil prices shot up 13 percent, smashing trading volume records, after OPEC and Russia cut a deal to reduce output to drain a global supply glut, but analysts warned they could remain modest by historical comparison as other producers fill the gap.

    The Organization of the Petroleum Exporting Countries (OPEC)agreed on Wednesday its first oil output reduction since 2008 after de-facto leader Saudi Arabia accepted "a big hit" and dropped a demand that arch-rival Iran also slash output. The deal also included the group's first coordinated action with non-OPEC member Russia in 15 years.

    "OPEC has agreed to an historic production cut," analysts at AB Bernstein said. "The cut of 1.2 million barrels per day (bpd) was at the upper end of expectations (0.7-1.2 million bpd). An additional cut of 0.6 million bpd from non-OPEC countries could significantly add to what has been announced by OPEC."

    Following the announcements, the price for Brent crude futures LCOc1, the international benchmark for oil prices, jumped 13 percent from below $50 on Wednesday to $52.54 per barrel at 0600 GMT.

    U.S. West Texas Intermediate (WTI) crude futures also rose back above $50, trading at $50.11 a barrel at 0600 GMT.

    "OPEC has delivered an agreement," said Jason Gammel of U.S. investment bank Jefferies. "Bulls got as much as could be hoped for...For the time being, oil prices have received a huge support."

    The development also triggered frenzied trading, with Brent futures trading volumes for February and March, when the supply cut will start to be visible in the market, hitting record volumes.

    The second front-month Brent crude futures contract, currently February 2017, traded a record 783,000 lots of 1,000 barrels each on Wednesday, worth around $39 billion and easily beating a previous record of just over 600,000 reached in September. That's more than eight times actual daily global crude oil consumption.

    March Brent traded 288,64000 lots of 1,000 barrels each, compared with a previous record of 228,7000 lots done in July 2014.

    The records also meant that Brent volumes far exceeded trades in U.S. West Texas Intermediate (WTI) crude futures, which tend to be higher than those for Brent, but which registered only 368,000 and 214,800 lots for February and March, respectively.


    Despite the agreed deal, some doubts over the cut remained. "This is an agreement to cap production levels, not export levels," British bank Barclays said. "The outcome is consistent with... what OPEC production levels were expected to be in 2017 irrespective of the deal reached."

    Meanwhile U.S. bank Morgan Stanley said that "skepticism remains on individual countries' follow-through (on the cut), which is keeping prices below year-to-date highs (of $53.73 per barrel in October) for now."

    Despite the jump in prices, they are still only at September-October levels - when plans for a cut were first announced - and prices are at less than half their mid-2014 levels, when the global glut started.

    Goldman Sachs said in a note following the agreement that it expected oil prices to average just $55 per barrel in the first half of next year.

    OPEC produces a third of global oil, or around 33.6 million bpd, and the deal aims to reduce output by 1.2 million bpd from January 2017, similar to January 2016 levels, when prices fell to over 10-year lows amid ballooning oversupply.

    Analysts said that the cuts would leave the field open for other producers, especially U.S. shale drillers.

    "We do not believe that oil prices can sustainably remain above $55 per barrel, with global production responding first and foremost in the U.S.," Goldman Sachs said.

    U.S. crude production has risen by over 3 percent this year to 8.7 million bpd, as its drillers have aggressively slashed costs.
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    More LNG exports possible from U.S. ports

    Sempra Energy said it filed the necessary paperwork to hasten the development of a port in Texas that could export liquefied natural gas, seen as a strategic asset.

    Sempra, which has its headquarters in San Diego, filed applications with the U.S. Federal Energy Regulatory Commission for exports and construction of the proposed Port Arthur LNG plant in southeast Texas.

    "Our experience in developing, building and operating energy infrastructure will help us deliver a cost-competitive project to the global LNG market," Octavio Simoes, the president of Sempra's LNG and pipeline unit, said in a statement.

    The project calls for everything from storage tanks to refrigerants and marine loading facilities at the proposed Texas plant.

    A potential site for LNG development in Texas could have export capacity. Sempra last year started the filing process with FERC to export LNG sourced from U.S. reserve basins to countries that have, or will have, a free-trade deal with the United States.

    A special permit is needed to export LNG sources from domestic reserves to countries that don't have a U.S. free-trade agreement.

    A vessel left its port at Sabine Pass, La., in February with the first cargo of LNG ever sourced from U.S. shale areas to the foreign market. Cheniere Energy Partners, which operates the Sabine Pass liquefaction plant, said the shipment marked a new era for the U.S. LNG sector.

    For U.S. allies in Europe, the abundance of natural gas from domestic shale basins could be used as a tool to break the Russian grip on the European economy. European leaders said last year LNG sourced from U.S. shale basins may present a source of diversity with the right infrastructure in place.

    Low energy prices may curb some options for exports. In July, a joint venture led by Royal Dutch Shell said capital constraints were in part behind a decision to delay a final investment decision for a gas export facility in Canada.
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    Centrica offloads Trinidad offshore fields to Shell

    UK’s Centrica has decided to sell all of its gas fields offshore Trinidad & Tobago to Shell.

    In a statement on Tuesday, Centrica said Shell would buy its entire portfolio of gas assets, located offshore the Caribbean Country, for an initial cash consideration of $30 million (£24 million).

    The assets consist of a 17.3 per cent interest in the producing NCMA-1 block and 80 per cent and 90 per cent operated interests respectively in the undeveloped blocks NCMA-4 and Block 22.

    In addition to the initial consideration, Centrica will receive further payments subject to Block 22 and NCMA-4 reaching agreed project milestones, Centrica said.

    “The divestment is in line with Centrica’s strategy to focus its E&P activity in the UK, Netherlands and Norway and to exit its positions in Canada and Trinidad and Tobago,“ the company provided rationale behind the decision to sell.

    The transaction is subject to government and partner approval and is expected to close in the first half of 2017.

    Centrica entered Trinidad & Tobago in 2010 with the acquisition from Suncor of interests in NCMA-1 and Blocks 22, 1a and 1b. It was awarded its interest in NCMA-4 as part of a shallow water bid round in the same year.

    In April 2016 Centrica sold its 80 per cent operating interests in Blocks 1a and 1b to De Novo Energy.

    That Centrica is indeed focusing on Norway, speaks the fact that the company on Wednesday filed the plan for Development and Operation (PDO) of the Oda field to the Norwegian Ministry of Petroleum and Energy.
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    Indonesia's Tangguh LNG project has invited market participants to bid for 2017-2019 cargoes.

    The Indonesian firm is offering between eight and 10 liquefied natural gas (LNG) cargoes per year, two trading sources with direct knowledge of the invitation said.

    Bids are due on Dec. 5, the sources said, adding buyers were not obligated to bid for all the supplies and could selectively bid for any number of cargoes.

    Indonesia is oversupplied with the super-cooled fuel, and had 63 uncommitted cargoes of LNG for 2017 delivery from Indonesia's Tangguh and Bontang projects, Wiratmaja Puja, the country's Director General of Oil and Gas, said in October.

    Attached Files
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    Chevron stops production at Gorgon Train 1, again

    US-based energy giant Chevron has halted production at the first liquefaction train of its giant Gorgon LNG facility in Western Australia.

    This comes just weeks after LNG production was restarted from the Gorgon Train 1 following a shutdown for “minor maintenance.”

    “Production from Gorgon LNG Train 1 has been temporarily halted as we assess some recent performance variations,” a Chevron spokesman said in an emailed statement on Wednesday.

    “Train 2 production is unaffected, and we continue to produce LNG and load cargos,” the spokesman added.

    Production at Chevron’s US$54 billion Gorgon LNG project has been hit several times this year since it shipped its first cargo of the chilled fuel on March 21 .

    The LNG facility faced three production interruptions in March, July, and the mentioned one in the beginning of November.

    Once in full production, the three-train plant on Barrow Island is expected to have a capacity of 15.6 million mt/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).
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    OPEC cuts table

    Image titleOPEC cuts table

    Attached Files
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    The Great Shale Barrier.

    Image title
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    Norway's Kollsness and Nyhamna gas assets hit by unplanned outages

    Gas output capacity on the Norwegian Continental shelf was hit Tuesday afternoon with two unplanned outages -- at the Nyhamna and Kollsness gas hubs -- with a combined within-day impact of 17 million cu m/d for Tuesday's gas day while no day-ahead impact was indicated, Norwegian TSO Gassco said.

    The Kollsness outage, with a within-day volume impact of 11.5 million cu m, started at 1005 GMT and was expected to last 12-13 hours.

    The second unplanned event, scheduled to start Tuesday at 1547 GMT, will hit the Nyhamna gas processing field with a within-day impact of 5.5 million cu m and an expected duration of 1-2 days.

    Gassco reported process problems as the reason for both outages.

    Meanwhile, the Heimdal gas hub unplanned maintenance was ongoing with a 13.5 million cu m volume impact for the Tuesday gas day while day-ahead volumes will also be reduced by 13.5 million cu m/d, according to Gassco.

    The cut is set to last 2-5 days.
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    Baker Hughes teams with private equity to create new BJ Services

    Baker Hughes is selling a majority of its hydraulic fracturing and cementing business to private equity partners to create the new BJ Services company in the Houston area.

    The new company will operate as a standalone joint venture — it won’t be publicly traded —  and restore the BJ Services name as its own company. Baker Hughes bought BJ Services Co., of Houston, for $5.5 billion in 2009, to expand into the fracking business, and the deal has served as a financial drag for Baker Hughes ever since.

    The deal comes less than a month after it was announced that Baker Hughes is combining with a unit of General Electric in a $32 billion merger that would create an expanded Baker Hughes. GE, based in Boston, would own 62.5 percent of the combined company, which will continue to trade under Baker Hughes’ BHI stock ticker.

    The BJ Services pressure pumping deal brings Baker Hughes into partnerships with Houston-based CSL Capital Management private equity firm and Goldman Sach’s merchant banking fund, called West Street Energy Partners. Baker Hughes will keep a 46.7 percent ownership stake in BJ Services.

    Baker Hughes’ pressure pumping business will combine with CSL’s Allied Oil & Gas Services business, which was acquired earlier this year. New Allied Chief Executive Warren Zemlak, a veteran of Schlumberger, will lead the new BJ Services, which will be headquartered in Tomball.

    Baker Hughes Chairman and CEO Martin Craighead  said the deal creates a “pure-play pressure pumping competitor” that can better compete with industry leaders Schlumberger and Halliburton.

    CSL and Goldman Sachs will together contribute $325 million in cash to the new company. Baker Hughes will receive $150 million of the total, while the remaining $175 million will position BJ Services for growth.

    “We look forward to renewing the BJ Services legacy and utilizing our experience building highly reliable teams and efficient operations to create a North American pressure pumping leader,” Zemlak said in the announcement.

    Ever since the failed acquisition of Baker Hughes by Halliburton earlier this year, Craighead has said the plan was to sell a stake in the pressure pumping business as Baker Hughes focuses more on technology and product sales.

    The new BJ Services deal is an “expected outcome” for Baker Hughes to “wash its hands of a very unfortunate legacy,” said Bill Herbert, a senior energy analyst Piper Jaffray & Co., an investment research firm.Baker Hughes is essentially getting a $150 million return on the majority of a business is paid more than $5 billion to acquire.

    “Baker didn’t have an especially strong negotiating hand because it had destroyed so much value,” Herbert said.

    However, the new BJ Services is better positioned with Zemlak’s leadership and CSL’s strong track record in oilfield services, Herbert said, noting that the business still could have strong long-term value.
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    Canada approves new pipelines to boost exports, greens ready to fight

    Canada on Tuesday approved Kinder Morgan Inc's hotly contested plan to twin a pipeline from the Alberta oil sands to the Pacific coast, setting up a battle with environmentalists who helped elect Prime Minister Justin Trudeau.

    The government, under pressure from both green groups and the energy industry, said allowing Kinder Morgan to build a second pipeline next to its existing Trans Mountain line will help ensure oil exports reach Asia and reduce reliance on the U.S. market.

    "Our duty is to permit infrastructure so Canada's resources get to market in a more environmentally responsible way, creating jobs and a thriving economy," Trudeau told a news conference, adding he was "under no illusions" that the Kinder Morgan decision would be bitterly disputed.

    The government blocked Enbridge Inc's Northern Gateway pipeline from Alberta to the Pacific Coast, as expected. Trudeau had long opposed the project, which would run through the Great Bear Rainforest.

    Enbridge, however, will be allowed to replace the Canadian segments of its ageing Line 3 from Alberta to Wisconsin. The proposed upgrade had been less controversial than Northern Gateway project. Enbridge said it expected the pipeline to enter service in 2019, pending U.S. regulatory approval.

    Canada's energy sector, hit hard by a two-year slump in oil prices, wants more pipelines to help ease bottlenecks in moving crude out of Alberta. Canada, home to the world's third-largest crude reserves, wants to diversify away from its reliance on the United States and into Asian markets.

    Kinder Morgan's C$6.8 billion ($5.06 billion) project would nearly triple capacity on the artery to 890,000 barrels a day.

    ""We are getting a chance to break our landlock. We're getting a chance to sell to China and other new markets at better prices," Alberta Premier Rachel Notley said in a statement.

    Environmental groups, who say the risk of a spill is too great, were quick to promise resistance to the Trans Mountain project.

    "You will see the movement continue to escalate in the streets as the number of protests and actions continue to grow, in the courts, and at the ballot box here in (British Columbia) and beyond," said Sven Biggs of climate group Stand.Earth.

    Trudeau, keen to show environmentalists he is not selling out to the energy industry, also said the government would ban tanker traffic along the northern coast of British Columbia.

    Earlier this month he said Ottawa would toughen its response to oil spills at sea, which some saw as a signal Trans Mountain would be approved.

    The Liberals have taken other measures recently to shore up their green credentials, including speeding up plans to virtually eliminate coal-fired electricity, promising to bring in a minimum price on carbon emissions by 2018 and vowing to revamp the national energy regulator.

    Canada's former Conservative government had approved Northern Gateway in 2014 but a federal court overturned the approval last June.
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    Australia takes aim at oil and gas industry in tax review

    Australia is targeting the oil and gas industry for a tax review ahead of next year's budget, in a push to boost revenue after a sharp slump over the past three years and collect more from multinational giants.

    Treasurer Scott Morrison said on Wednesday that takings from the nation's petroleum resource rent tax had halved to A$800 million ($600 million) since 2013, while revenue from crude oil excise taxes had more than halved due to a collapse in oil and gas prices and falling output.

    "This is about ensuring sustainability and effectiveness and efficiency of our tax system. It is actually not primarily about revenue. It is important these companies pay their fair share when it comes to these issues," Morrison told reporters.

    The drive comes as Australia is not expected to reap as much as hoped from a more than $200 billion investment spree over the past few years that will make it the world's biggest exporter of liquefied natural gas (LNG) by around 2019.

    That is because the petroleum resource rent tax (PRRT) is designed to collect revenue after projects have recouped their investment and are profitable, which will take longer than expected in a world of weak oil and gas prices.

    "LNG projects, unlike conventional oil and gas projects, involve billions of dollars of up-front investment. It will take 10 or more years to recover that investment before making a return," Shell Australia Chairman Andrew Smith said in an emailed statement.

    Canberra has already been tackling multinationals over clever accounting and the use of trading operations offshore to lower their tax exposure in Australia, and Morrison said the oil and gas focus is part of that effort.

    Australia last targeted the resources industry in 2010, when then Labor Prime Minister Kevin Rudd proposed a super profits tax at the height of the mining boom which was eventually heavily watered down after a bitter fight with miners and contributed to his downfall.

    The oil and gas tax review follows a recent audit, which found that Australia's biggest petroleum operation, the North West Shelf joint venture, whose owners include Chevron Corp and Royal Dutch Shell, may have underpaid royalties by taking ineligible deductions.

    Morrison said deduction calculations will be examined as part of the review.


    The oil and gas industry said it would cooperate with the review, in contrast with the mining industry in 2010, saying the petroleum resource rent tax was working as intended.

    ExxonMobil said it had paid over A$12 billion in PRRT since 1990.

    "We welcome the review. This will give us another opportunity to talk about our contribution," ExxonMobil Australia Chairman Richard Owen said at an event in Sydney.

    The Australian Petroleum Production and Exploration Association said the industry had paid more than A$5 billion in taxes in 2015, despite recording its first ever net loss.

    "The continued payment of taxes at a time when the industry is under severe pressure debunks critics' suggestions that the industry is not somehow paying its way," APPEA Chief Executive Malcolm Roberts said in a statement.

    Oil and gas company shares fell on Wednesday along with oil prices, as OPEC looked like it would fail to agree on a production cut. Woodside fell 2 percent, Santos dropped 3.5 percent, while Beach Energy slid 4.8 percent.
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    Leaner and meaner: U.S. shale greater threat to OPEC after oil price war

    In a corner of the prolific Bakken shale play in North Dakota, oil companies can now pump crude at a price almost as low as that enjoyed by OPEC giants Iran and Iraq.

    Until a few years ago it was unprofitable to produce oil from shale in the United States. The steep slide in costs could encourage more U.S. shale output if OPEC members cut supplies, undermining the producer group's ability to boost prices. OPEC ministers meet Wednesday to weigh output cuts to end a two-year glut that has pressured global oil prices.

    In shale fields from Texas to North Dakota, production costs have roughly halved since 2014, when Saudi Arabia signaled an output free-for-all in an attempt to drive higher-cost shale producers out of the market.

    Rather than killing the U.S. shale industry, the ensuing two-year price war made shale a stronger rival, even in the current low-price environment.

    In Dunn County, North Dakota, there are around 2,000 square miles where the cost to produce Bakken shale is $15 a barrel and falling, according to Lynn Helms, head of the state's Department of Mineral Resources.

    "The success in Dunn County has been fantastic," said Ron Ness, president of the North Dakota Petroleum Council.

    Dunn County's cost is about the same as Iran's, and a little higher than Iraq's. Dunn County produces about 200,000 barrels of oil a day, about a fifth of daily production in the state.

    It is North Dakota's sweet spot because it boasts the lowest costs in the state, yet improved technology and drilling techniques have boosted efficiency for the whole state and the entire U.S. oil industry.

    The breakeven cost per barrel, on average, to produce Bakken shale at the wellhead has fallen to $29.44 in 2016 from $59.03 in 2014, according to consultancy Rystad Energy. It added that in terms of wellhead prices, Bakken is the most competitive of major U.S. shale plays.

    Wood Mackenzie said technology advances should further reduce breakeven points.

    Landlocked Bakken producers still need a substantially higher international price than their breakeven cost to make a profit, since they pay more to transport crude to market than producers in most other U.S. regions.

    International oil prices of $45 a barrel are enough for some Bakken producers to profit, Ness said, and $55 would encourage production growth.

    Benchmark Brent prices plummeted from nearly $116 a barrel in mid-2014 to just $27 earlier this year. Prices have since recovered to nearly $46. That is still too low for members of the Organization of the Petroleum Exporting Countries, whose state budgets depend on petrodollar revenues that plummeted during the price war.

    For OPEC ministers meeting in Vienna on Wednesday, a major concern is that an output cut would encourage a quick response from U.S. shale producers, who have slashed costs and have been steadily adding drilling rigs.

    "Right now, OPEC understands we're in a push-and-pull experiment with the United States," said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

    "Two years ago, we thought prices hovering around $50 to $60 meant that non-OPEC production growth would end. But U.S. production came back stronger."

    In a recent earnings call, Hess Corp said it has improved its cost performance in the Bakken, with well costs falling and initial production rates rising, though it did not give more details.

    "Everybody is drilling wells faster and completing them better," said Mike Breard, an energy stock analyst at Hodges Capital Management in Dallas. "It's not just a Bakken phenomenon."

    Breard said he prefers shale stocks in the Permian basin in Texas, where he is expecting more big gains in production next year. He is eyeing firms such as Parsley Energy Inc, Ring Energy Inc and Matador Resources Co.

    Oil companies are already investing big money to benefit from shale's resurgence. Tesoro Corp recently snapped up Western Refining Inc in a $4 billion deal to bulk up its exposure in Texas.

    Separately, trading firm Castleton Commodities International LLC bought more than $1 billion in assets from Anadarko Petroleum Corp to increase its stake in East Texas.

    Occidental Petroleum Corp's top executive recently said that company has enjoyed steady improvement in well productivity and lower drilling and completion costs in the Permian Basin.

    "Simply put, we can deliver more production with fewer wells," Vicki Hollub, the company's president and chief executive, told analysts on a recent call.

    Attached Files
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    US shale gas: The new industrial revolution

    The shale gas revolution has not yet completed its first decade as increasing yields and production now join a bipartisan consensus in Washington. Push US exports. US cost structure and LNG sendout mean the shale gas cost curve will stay connected to European gas markets. Against continental pipe gas or Australian LNG, the US shale gas revolution will drive the cost curve for global production.

    “Its not a supply story it’s a cost story”, said a speaker at the European Autumn Gas Conference (EAGC).

    Marcellus productivity, a four-fold increase in 6 years: Natural gas fracking rigs in the Marcellus have seen a huge jump in productivity. Rigs averaged 8-10 wells and 4-5000 feet in 2010. Now in 2016 laterals average 8000 feet and rigs average 20-25 lateral drills. Giving rig productivity a four-fold increase in 6 years.

    At the European Autumn Gas Conference, Jeff Nanna, VP – Upstream Investment Banking at Tudor, Pickering, Holt & Co. cited as example: The world’s longest lateral drill of 5880 feet took 50 days in 2013. This record was eclipsed in 2106 in the Ohio Utica with an 18,554-foot lateral taking only 18 days to drill. Sand used to prop open fractured pay zones has risen from 3 million lbs. per well to 9 million lbs. per well, greatly enhancing yield.

    Another speaker at the EAGC cited some equally amazing Marcellus productivity data. In 2010 a 1000 feet of lateral drilling cost $1800 a foot and produced 1.7 bcf of gas. In 2016 a similar 1000-foot lateral cost $1000 a foot and produced 2.2 bcf of gas, a 40 % drop in costs. Such growth in productivity allows a producer to make the same returns at $2 he once made at $3.50.

    The Golden Age of gas is only at the dawn: In Washington bipartisan support is building not only to expand the current soft ceiling of 120 bcma (12 bcf/d), but to expedite the review process and move towards a new ceiling of 20 bcf/d.

    Tapping into this fortuitous confluence: Falling feed gas costs, global low cost per ton liquefaction plants and a political push to expand current gas exports. The Golden Age of gas is only at the dawn.

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    Queensland LNG production may need to be slashed: WoodMac

    All three of Queensland's liquefied natural gas plants could end up running at less than full capacity as they struggle to remain in the black at current low LNG prices, according to respected consultancy Wood Mackenzie.

    The firm is warning that as ventures extend their drilling to lower quality coal seam gas acreage, many wells wouldn't be economic unless LNG prices recover. Up to a quarter of the projects' total production risks becoming unprofitable, it said.

    While Santos has already said it would not run its new $US18.5 billion GLNG venture at full production given the cost of sourcing additional gas, Origin Energy's Australia Pacific LNG venture and Shell's Queensland Curtis venture could find themselves in the same position should LNG prices remain depressed, said Wood Mackenzie analyst Saul Kavonic.

    "We think that with time it's going to impact all three projects," Mr Kavonic said. "They're just not delivering the way they were expected when they took sanction."

    The three Queensland projects differ from the conventional LNG projects on the north-west coast as they require ongoing drilling of coal seam gas wells to maintain production. But with Asian LNG spot prices in a slump that is expected to last several years, making that extra investment may not be worthwhile, especially as drilling extends beyond the "sweet spots" that hold the richest resources.

    "What's new about this is, we've never had in Australia or really globally the case of an economic decision to run LNG projects below capacity: it's always been once they are up and built and most of the capex is sunk, you try and squeeze out every drop that you can," Mr Kavonic said.

    "That is what will happen on the west coast with Gorgon, Wheatstone and Pluto and so on, but for these ones [in Queensland], because of the ongoing cost of drilling, it's a different story."

    Spokesmen for Shell and APLNG couldn't immediately respond.

    Other analysts have also pointed to the possibility the Queensland LNG projects will export less than envisaged. Credit Suisse's Mark Samter recently said that at lower oil prices that scenario was "possibly the most financially rational outcome for all parties".

    In its analysis, Wood Mackenzie found up to 43 per cent of the up to 8000 new wells needed across the three ventures over the next 30 years would be unprofitable if LNG prices remain low. It suggested the ventures may renegotiate LNG sales contracts to reduce contracted deliveries over the next few years given the well-supplied market.

    The findings raise more questions about the stubborn insistence of the Queensland LNG players to build three separate projects on Gladstone's Curtis Island, at a cost of at least $70 billion.

    Wood Mackenzie calculates that at current LNG prices in Asia of under $US7 per million British thermal units, new wells needed to be able to supply gas at less than $US6. But it estimates that up to 43 per cent of yet-to-be-drilled wells would fail to do so.

    "That then raises the question why would you drill all of that acreage up," Mr Kavonic said.

    While the decision whether to drill or not would be based on future prices rather than current ones, Wood Mackenzie is forecasting LNG prices won't materially increase until a structural oversupply of LNG wanes after 2020.

    Read more:
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    China to further open up upstream oil and gas sector by 2020

    China will open up its upstream oil sector further between 2016 and 2020, the official Xinhua news agency reported, citing the vice minister of the Ministry of Land and Resources.

    The world's largest energy consumer will introduce private investment in upstream prospecting and push forward reforms of the oil gas prospecting system, Xinhua reported.

    In addition, China will also open up the upstream uranium prospecting sector and allow private capital in the markets.

    China aims to add 5-8 mega oilfields with at least 100 million tonnes of reserves and 5-10 natural gas reserves with at least 100 billion cubic meters of deposit by 2020.
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    Winter Saudi-Europe Diesel Flows Seen Higher Despite Refinery Turnarounds

    Diesel shipments to Europe from Saudi Arabia show little signs of easing over winter, even as turnarounds at some refineries temporarily halt exports and some cargoes need blending to meet specifications in Germany.

    The 400,000-b/d Yasref refinery at the Red Sea port of Yanbu, one of about three Middle East facilities supplying Europe with diesel, is undergoing a turnaround, according to London-based consultants, Energy Aspects.

    The joint venture Aramco and Sinopec facility has shipped between one and three ultra-low-sulfur diesel cargoes varying in size from 40,000 tons to 90,000 tons each month to countries in northwest Europe and the Mediterranean over the last year, according to the OPIS Tanker Tracker.

    “Cold point has been an issue for ex-Yasref cargoes though they are supposed to address this during the current turnaround,” Robert Campbell, head of Energy Aspects oil product research said in an emailed response to questions.

    He said some Middle East diesel cargoes also did not meet German winter
    specifications, which complicated trading. But with blending, most cargoes were okay, he added.

    The last Yasref ULSD cargo was tracked leaving Yanbu port on on Nov. 2,
    discharging at Algeciras for Cepsa.

    But diesel shipments loading at another Saudi Arabian refinery at Jubail this
    month are already tracked higher than monthly volumes seen last winter.

    Four cargoes, all from the Sasref refinery, are currently on the water, with a
    total of 420,000 tons heading for Europe to arrive in December, data compiled from brokers, traders and vessel-tracking satellite data show.

    That’s just below the monthly average of 520,000 tons seen for ULSD imports to the 28 member countries of the EU from Saudi Arabia over the first eight months of this year, according to Eurostat trade data. Trade data show Saudi-Europe ULSD imports at 330,000 tons in November and 390,000 tons in December, falling to 230,000 tons by January.

    Middle East refinery turnarounds in November are estimated at 521,000 b/d, with 512,000 b/d offline in December. The region’s overall fourth-quarter global crude runs are forecast at 7.2 million b/d, out of a global total of 79.6
    million, according to Energy Aspects.
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    Russia, Iran agree to coordinate steps in oil market ahead of OPEC talks

    Russia's President Vladimir Putin and his Iranian counterpart Hassan Rouhani agreed to continue coordinating steps in global hydrocarbons markets in a phone conversation late Monday ahead of Wednesday's OPEC meeting, according to the Kremlin.

    "The presidents agreed to continue coordinating steps in global hydrocarbons markets, including as part of the energy dialog between Russia and the Organization of the Petroleum Exporting Countries," the Kremlin said in a statement.

    The leaders underlined "the crucial nature of OPEC measures to limit crude production as a key factor for stabilizing the oil market," it added. The statement came two days before 14 OPEC countries' ministers meet in Vienna to try to clinch what would be its first coordinated crude output cut since 2008, to help accelerate the market's rebalancing.

    They are expected to be joined by non-OPEC producers such as Russia, which has repeatedly said it will join any action agreed within OPEC.

    Putin said in October Russia is ready to join a coordinated production limit, but sees output freeze rather than a cut as sufficient. Russia's production stands at record levels of 11.2 million b/d.


    While Moscow has made attempts to secure a production deal in the past, such as at the producers' meeting in Doha in April, Tehran's position has been a major stumbling block in reaching an agreement.

    Iran did not send a representative to the April meeting, causing the talks to flop, has been among the countries asking for exemption from restrictions, and insisted on its right to regain its pre-sanctions market share of some 4 million b/d first.

    Putin's conversation with Rouhani came the day OPEC delegates held a technical meeting in Vienna, which resulted in an output proposal to the producer group's 14 ministers for approval at Wednesday's meeting but still left individual country quotas unsettled.

    Iranian oil minister Bijan Zanganeh on Monday reiterated his stance that OPEC members that increased their production and took Iran's market share while it was under western sanctions should bear a greater responsibility for cutting output to rebalance the market.

    The deal, preliminarily agreed in Algiers in September, set a ceiling for the group of between 32.5 million and 33 million b/d, which would require a cut of between 640,000 to 1.14 million b/d from its October levels, according to OPEC's own estimate.

    Moscow is also to host last-minute talks with two OPEC members on Tuesday, when Russia's energy minister Alexander Novak is expected to meet Algerian energy minister Noureddine Bouterfa and Venezuelan oil minister Eulogio del Pino, both of whom flew to Moscow on Monday, according to Algeria's energy ministry.

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    Report: Maersk, Dong discuss oil merger

    Denmark’s A.P. Moller-Maersk and Dong Energy are reportedly in talks to merge their oil and gas operations.

    Reuters reported on Monday, citing sources familiar with the matter, that the deal would create a business worth over $10 billion, including debt. The news agency also informed Maersk is working with Bank of America while J.P. Morgan is assisting Dong.

    Maersk said in September it was working to split the company into two separate entities – one focused on shipping and logistics and the other on oil and gas sector – with an aim to find solutions for future for the oil and oil related businesses within two years.

    Dong Energy recently said it was rethinking its oil and gas business, looking to focus on renewable energy. The company also stated it was no longer considering oil and gas as a long-term strategic commitment. Dong hired a banking and financial services company J.P. Morgan to conduct a preliminary market assessment for its oil and gas business.

    Reuters quoted a spokesman for Dong as saying: “We are in the very early stages of the sales process. There will be no sale before the end of the year and it is far too early to speculate over timing and indeed potential buyers.”
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    Japan's Idemitsu JV plans to expand LPG use at naphtha cracker

    Japan's Idemitsu Kosan said on Tuesday its joint venture with Mitsui Chemicals would conduct work to expand the processing of propane at Idemitsu's naphtha cracker to take advantage of cheap liquefied petroleum gas (LPG) prices.

    The work will be carried out next autumn and last about a month, during which time the cracker will be shut, a company spokeswoman said.

    The upgrade will boost the cracker's capacity to process propane as feedstock by three or four times, said Hideki Gotoh, deputy general manager of Idemitsu's petrochemical business. He declined to give the current capacity.

    He added that Idemitsu would pay the costs for the upgrade, without giving a figure.

    The benefit from boosting propane and cutting naphtha as feedstock is set to lead to cost cuts of around 1 billion yen ($8.90 million) a year, the company spokeswoman said.

    The cracker will take advantage of its location next to the LPG import facility in Idemitsu's Chiba refinery. It will mainly rely on LPG imports for feedstock rather than a small quantity of LPG produced at the plant, officials said.

    The cracker is separately scheduled to undergo planned maintenance next spring, company sources said.

    Idemitsu and Mitsui Chemicals set up the 50:50 venture in 2010 to jointly operate their naphtha crackers in Chiba, east of Tokyo, to save on costs.

    Idemitsu has a naphtha cracker adjacent to its Chiba refinery with capacity to produce 414,000 tonnes per year of ethylene, while Mitsui has one with a capacity of 612,000 tonnes per year.

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    Singapore HSFO/Dubai crack swap hits 4.5-year high on crude weakness, tighter supply

    The Singapore high sulfur fuel oil front-month paper crack spread versus the front-month Dubai crude oil swap hit a four-and-a-half-year high Monday, due to recent weakness in international crude prices and tightening HSFO supply, S&P Global Platts data showed.

    The front-month December FOB Singapore 180 CST high sulfur fuel oil/Dubai crack swap -- which measures the relative value of the product to crude oil -- rose 82 cents/b day on day to minus 55.4 cents/b Monday.

    The crack was last assessed higher on June 29, 2012, at 4.5 cents/b, Platts data showed.

    The front-month FOB Singapore 380 CST HSFO/Dubai crack swap was assessed at minus $1.775/b Monday, up 81.9 cents/b day on day, also a four-and-a-half- year high -- last seen when the crack touched minus $1.648/b on June 29, 2012, Platts data showed.

    As at 0645 GMT Tuesday, brokers were pegging the front-month FOB 180 CST HSFO crack swap versus Dubai at around minus 55 cents/b, citing firm buying levels in the outright Singapore fuel oil swaps market.

    The HSFO cracks have been strengthening since early October, on the back of volatility in crude prices amid ongoing skepticism regarding OPEC's much-hyped production freeze agreement.

    With OPEC's official November 30 summit in Vienna barely a day away, the December Dubai swap was assessed at $44.57/b Monday, down 5.17% from $47/b assessed on October 31.

    Crude prices might hold back till any further announcement regarding a production freeze agreement is made, market analysts said.

    "Oil prices may be choppy until Wednesday. The outcome of the November 30 summit is a binary risk," Mizuho Bank said in a report.

    The strength in fuel oil cracks may, however, be attributable to more than just weaker crude prices, market sources said.

    "Crude can swing whichever way but the fact remains that flat prices [for fuel oil] are holding firm," a Singapore-based broker said Tuesday morning.

    Singapore 180 CST HSFO swap was assessed at $279.5/mt Monday, Platts data showed, after dipping to a monthly low of $260.45/mt on November 14.

    "It could be a number of factors, including strong fuel oil fundamentals and hedging volume," said a trader.

    Poorer quality Russian fuel oil grades could be reducing the supply of high quality blendstock in the Singapore region, market sources had said the previous week.

    "For Far East refiners like us, we are seeing less pure straight runs. The pure M-100 that we see, to blend, is getting heavier in density, and [has] higher viscosity. These factors reduce the supply pool, eventually leading the blending margin to drop," a refinery trader said.

    In Singapore, buying interest for December has been strong as most cargoes arriving from the West have been carrying blendstock components rather than ready-grade bunker fuel material, trade sources said.
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    China's crude oil stocks down 1.9 percent

    China's commercial crude oil inventories declined 1.9 percent month-on-month in October as crude imports fell sharply, data showed Monday.

    Net imports of crude oil fell 12.7 percent in October, while the amount of oil refined increased, bringing stocks down.

    Diesel reserves also dropped due to high demand from autumn farming and construction projects in October.

    However, gasoline stocks rose slightly as the cold weather affected travelling and reduced demand for petrol.
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    Exxon, Chevron Set to Bid in Mexico’s Deepwater Oil Auctions

    Chevron Corp. has joined forces with Petroleos Mexicanos and Japan’s Inpex Corp. to bid next week for the right to explore for oil and natural gas, the first time the state-owned operator will partner with private companies to develop crude in the Gulf of Mexico.

    Seven groups and eight individual bidders have been qualified to participate in the Dec. 5 auctions that include the Trion field joint-venture with Pemex and other 10 deepwater blocks, Mexico’s National Hydrocarbons Commission announced in Mexico City on Monday. The regulator didn’t specify which bids were for the joint venture or for the other areas.

    Total SA joined forces with BP Plc and Norway’s Statoil in one group, and with Exxon Mobil Corp. in another. Eni SpA and Lukoil also joined up, and Anadarko Petroleum Corp. and Royal Dutch Shell Plc formed another group.

    "We are attracting investment and technoloy in deep waters, where a large part of our national reserves are located," Hector Moreira, Commissioner at the Mexico Oil Regulator and former Pemex board member, said Monday. "We have attracted some of the largest companies in the world that have the technology and investment capacities to develop those resources."

    Sweeter Terms

    The Mexican government made a series of adjustments to sweeten the terms of the Joint Operating Agreement that Petroleos Mexicanos will sign with potential partners to develop the Trion field. Landing a major producer as a partner will signal the beginning of a new era for Mexico’s reeling oil giant. Burdened with nearly $100 billion in financial debt and a 12-year slump in crude output, Pemex has pointed to partnerships as the road to its salvation since the government ended the company’s 76-year production monopoly in 2014.

    "We think the offer and opportunity are good enough for Trion to be awarded," Pablo Medina, an oil and energy analyst at Wood Mackenzie, said in a phone interview. "The key to Trion being awarded was the willingness to change the JOA and the conditions of the contract. Becoming Pemex’s first partner could create goodwill down the road as the industry continues to open."

    Mexican upstart Sierra Oil & Gas, which has backing from private equity firms Riverstone Holdings and BlackRock Inc, and Malaysia’s Petroliam Nasional Bhd, or Petronas, have joined forces in one group as well as another that includes Murphy Oil Corp. and Ophir Energy Plc. BHP Billiton Ltd and China’s CNOOC Ltd will participate individually.

    "Many of the companies that are participating in this bidding have been in Mexico with a permanent office in Mexico for decades waiting for this moment," Juan Carlos Zepeda, National Hydrocarbons Commissioner, said in a Nov. 22 interview in Mexico City. "We have very serious players and there is great expectation."
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    Eni aiming to cut stake in Egypt's Zohr offshore gas find to 50 pct

    Italian oil and gas company Eni is in talks with various parties to cut its stake in the giant Zohr gas field offshore Egypt to 50 percent, Chief Executive Claudio Descalzi said on Monday.

    The company, which owns the whole concession area that includes its Zohr discovery, agreed last week to sell a 10 percent stake to BP for $375 million.

    BP, which has an option to buy another 5 percent, will also reimburse Eni for around $150 million of past costs.

    "We believe we can operate the field with 50 percent, that's my objective," Descalzi said on the sidelines of an industry event.

    Zohr, discovered by Eni in 2015, is the biggest gas field ever found in the Mediterranean with an estimated 850 billion cubic metres of gas in place.

    The approval process for development of the field was completed in February and first gas is expected by the end of 2017.

    Descalzi said Eni was talking to a series of groups about the sale of further stakes.

    "This could happen fairly quickly. In our business that could also mean a few months," he said.

    Bank of America Merrill Lynch analysts said in a note the $525 million capital injection Eni had received from the Zohr deal was viewed as good news for the company.

    "It helps to cover the dividend in the short term and is evidence that Eni can execute disposals after the failed sale of (chemical unit) Versalis earlier in the year," the bank said.

    Eni, whose cash flow fell 19 percent in the third quarter, is committed to selling 5 billion euros ($5.30 billion) of assets in the next two years to help fund investments.

    Descalzi said a decision on Mozambique was "ripe" but added permits and bureaucracy were slowing things down.

    "I would be happy if we had something to announce at the next strategy meeting," he said. Eni usually gives an annual presentation on its strategy in the first quarter of the year.

    Sources have said Exxon Mobil has already clinched a deal to buy a stake in the Area 4 concession but an announcement would not be made for several months.

    Merrill Lynch said it believed a sale of up to 25 percent of Area 4 could be announced by the end of this year and raise close to $2.5 billion.

    In 2013 Eni sold 20 percent of its Area 4 licence to China's CNPC for $4.2 billion but since then oil and gas prices have come down by more than half.
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    Glencore comes out top as Egypt awards mega LNG import tender

    Egypt will import around 60 cargoes of liquefied natural gas (LNG) next year and Glencore will be the biggest supplier, trading sources with knowledge of the results of Egypt's mega tender for 2017 and 2018 said on Monday.

    Glencore bagged the right to supply around 25 liquefied natural gas (LNG) cargoes to Egypt, while second-placed Trafigura is understood to have won the right to supply about 18 cargoes of the super-cooled fuel, the trading sources said.

    Other parties successful in Egypt Natural Gas Holding's (EGAS) tender included BB Energy, Gunvor and Vitol, the sources added.

    State-run EGAS, which issued the import tender in late October, sought 96 cargoes for delivery in 2017 and 2018 in total, with an option to buy 12 additional cargoes in 2017.

    The company has now probably secured all of its 2017 requirements, and just six cargoes for 2018, traders said. It was not immediately clear why it did not seek more cargoes for 2018 delivery.

    The details of the tender results could not be directly confirmed as EGAS did not respond to Reuters' queries. A Glencore spokesperson also declined to comment on the results.

    January-March 2017 cargoes are understood to have been awarded at a slope of around 15 percent to crude, while the remaining cargoes for 2017 delivery are likely to have been priced at a slope of 12 percent and below, the trading sources said.

    The steeper premium for the January-March cargoes is estimated to be equivalent to about $7.50 per million British thermal units (mmBtu). In comparison, Asian spot LNG prices for January delivery LNG-AS are currently pegged around $7.10/mmBtu.

    "It is bullish news," a Singapore-based trader said, referring to the first quarter 2017 volumes and prices paid by EGAS.

    However, the lower price for cargoes to be delivered later in 2017 reflect the weaker demand-supply fundamentals expected in the LNG market, said a second trader based in Singapore. Australia and the United States are due to ramp up production in the second half of next year.

    Under the tender terms, LNG suppliers may have to wait as long as six months to get paid for deliveries arriving between January and June 2017. Thereafter payments will take 120 days compared with the 90 days that LNG shippers previously got paid after delivery.
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    Centennial to add more Delaware basin assets in $855-million deal

    Centennial Resource Development Inc., Denver, has agreed to acquire 100% of the leasehold interests and related upstream assets in Reeves County, Tex., owned by Silverback Exploration LLC, San Antonio, for $855 million.

    Centennial is backed by energy-focused private equity firm Riverstone Holdings LLC, an affiliate of which agreed to acquire the assets on Nov. 21. The affiliate on Nov. 27 agreed to assign its right to purchase the assets to Centennial. The deal is expected to close on Dec. 30.

    The deal comprises 35,000 net acres, of which 95% is operated with an average working interest of 88%, that directly offsets existing Centennial acreage in Reeves County, with current net production of 3,500 boe/d. Once the deal is complete, Centennial will have 77,000 contiguous net acres in the Delaware basin.

    Centennial sees at least 600 horizontal drilling locations on the acreage assuming 880-ft spacing prospective for the Upper Wolfcamp A, Lower Wolfcamp A, and Wolfcamp B, which are estimated to have 210, 180, and 220 locations, respectively.

    The firm says the acreage has an estimated undeveloped resource potential of more than 600 million boe from the Wolfcamp A and Wolfcamp B formations, with additional upside potential from the Wolfcamp C, Avalon, and Bone Spring formations. The deal increases Centennial’s operated extended lateral locations by 136%.

    “This transaction increases our horizontal drilling inventory by 44% and more than doubles our inventory of extended length laterals, which we believe provides the most capital-efficient development,” commented Mark Papa, Centennial chief executive officer.

    He added the deal allows Centennial to increases its oil production target for 2020 to 50,000 b/d of oil from 30,000 b/d.

    Focused on the southern Delaware basin, Centennial Resource Development was formed earlier this year through the merger of Centennial Resource Production LLC and Silver Run Acquisition Corp., a special purpose acquisition firm created by Papa and Riverstone (OGJ Online, July 22, 2016).

    Papa, a Riverstone partner who was chairman and chief executive officer of EOG Resources Inc. during 1999-2013, has led Centennial since that deal was completed. Centennial Resource Production was formed in 2013 by an affiliate of NGP Energy Capital Management LLC of Irving, Tex.

    The deal between Centennial and Silverback is among dozens to have taken place since midyear in the Permian basin of West Texas and southeastern New Mexico, where the Delaware and Midland basins have drawn considerable interest.

    Last week, Midland, Tex.,-based Concho Resources Inc. struck its third deal for Permian acreage this year alone, agreeing to buy 16,400 net acres in the northern Delaware basin from an undisclosed buyer for $430 million
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    Azeri Energy Ministry: Oil minister has cancelled trip to Vienna

    Azeri Energy Ministry: Oil minister has cancelled trip to Vienna; will not take part in OPEC meetings

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    Genscape sees big build in Cushing inventory

    Genscape Cushing inv: big build: 1.8mbbl in week ended Nov 25.

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    Shale Fracking Rebound Starts With Costlier Grains of Sand

     The oilfield service companies that supply everything from sand to sophisticated robot rigs are seeking a new lease on life as America’s fracking fortunes begin to turn.

    Shale drillers have added 158 rigs since May, according to Baker Hughes Inc. At the same time, companies such as Chesapeake Energy Corp. and EOG Resources Inc. have been increasing their efficiency by cramming more and more sand into individual wells, aiming to extend their reach miles further. That’s boosted sand prices roughly 25 percent to about $24 a ton, according to IHS Inc.

    It’s an early sign that oilfield services, hard hit by a two-year slump in oil prices, are seeing the first hints of a turnaround. With spending by drillers in the lower 48 states now forecast to be $1 billion higher than analysts expected in the final three months of 2016, pricing talks are heating up as servicers face off against explorers fearful of uncertain oil prices ahead.

    “Sand certainly led the way here, and that’s starting to make its way into other product lines,” said James West, an Evercore ISI analyst in New York, in a telephone interview. “It’s going to be a much more rigorous pricing recovery as we go into 2017, given the very ambitious drilling programs and production forecasts from the North American E&P industry.”

    Oil-services companies sell explorers everything from the sand, water and chemicals they pump into the ground to the diesel that powers their equipment. Their services can include mapping pockets of underground oil, cementing wells in place and even breathing new life into old reservoirs.

    Reopening Conversations

    With West Texas Intermediate crude prices now up by more than 70 percent from this year’s low, the industry is starting to use higher sand prices and the added activity in oil fields ranging from Texas’s Permian Basin to the Scoop and Stack plays of Oklahoma as an excuse to reopen conversations over how much they’ll be paid, said Samir Nangia, an IHS analyst.

    Already, leases for more-efficient rigs that can walk from well to well and drill out several miles sideways, are up by as much as $5,000 a day, a third more expensive since May, according to Evercore. Spending to drill and complete wells in the lower 48 states will be $13 billion, or about $1 billion more than previously forecast, for the final three months of the year, Jud Bailey, an analyst at Wells Fargo & Co., wrote in a Nov. 11 note to investors. He expects the strong year-end activity to carry over into next year.

    IHS’s Nangia said service companies may boost prices by almost 10 percent a year through 2021. "We’re about 30 percent below full-cycle pricing, maybe even 10 percent below cash costs for a lot of the pumpers," he said.

    For months, the service companies have been saying that the prices they’re able to charge aren’t sustainable. It’s a claim that’s been largely supported as more than 100 contractors in North America have gone bankrupt over the past two years, according to the law firm Haynes & Boone LLP.

    While stock indexes for both explorers and servicers remain down by almost half since the downturn began in mid-2014, explorers are recovering more quickly. Both groups touched bottom on Jan. 20. Since then, oil explorers in the Standard & Poor’s 500 Index are up 61 percent, compared with a 30 percent climb in the Philadelphia Oil Services Index.

    Negotiations between the sides won’t be easy, according to recent statements by Jeff Miller, president of Halliburton Co., the world’s largest fracking service provider, and Bob Dudley, the chief executive officer of BP Plc, the London-based explorer.

    In a conference call with analysts and investors last month, Miller referred to pricing talks with explorers as "a brawl." Around the same time, Dudley said at the Oil & Money conference in London that he wants 75 percent of the cost reductions producers won during the market downturn to "stick," even if crude prices continue to rise.

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    The talks are occurring as oilfield contractors are increasingly teaming up with equipment makers in an effort to cut their own costs and offer oil explorers more streamlined and comprehensive options for the services and gear needed to siphon crude out of the ground. Schlumberger Ltd., for instance, bought manufacturer Cameron International Corp. this year. That was followed by an announced tie-up between Baker Hughes and General Electric Co.’s oilfield business.

    Vienna Effect

    Much of what happens from here will probably depend on what happens halfway around the world in Vienna. In September, OPEC said it would discuss an agreement to cut production to a range of 32.5 million to 33 million barrels a day. Since then, Iraq, Iran, Nigeria and Libya have sought exemptions. The 14-member group will meet in the Austrian capital on Nov. 30.

    The oilfield price increases are “not a leap forward,” said Chase Mulvehill, an analyst at Wolfe Research. "This is a gradual shift upward in pricing, and that probably continues as we move into 2017, assuming that OPEC cooperates. If OPEC holds the line, or production continues to increase with OPEC, that puts a risk to the 2017 recovery story for U.S. onshore.”

    In order for onshore explorers to make more longer-term budget decisions, many would trade the higher, volatile oil prices for more consistency, according to IHS’s Nangia.

    "Everybody feels that if we can be at $50 a barrel or higher, that would be helpful," Nangia said. "Stability helps."

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    Iran awards key oil deal to Schlumberger

    Iran says it has signed a memorandum of understanding (MOU) with Schlumberger – the world's largest oil field services company - over the development of several southern oil fields.

    The MOU was signed between Schlumberger and the National Iranian South Oil Company (NISOC) – a subsidiary of the National Iranian Oil Company (NIOC) – which is mostly in charge of the developments of prospects in Iran’s oil-rich Khouzestan province.

    Accordingly, the French company would be required to study the formations of Shadegan, Parsi and Rag-e Sefid oil fields in Khouzestan.

    The projects would be carried out within the framework of Iran’s new generation of oil contracts, Shana news agency reported.

    Schlumberger would be the second giant energy corporation to win a deal in Iran’s oil industry. Earlier this month, Total signed a contract to develop a major gas project in Iran’s South Pars gas field. Total and Schlumberger now appear to have provided France with a strong foothold in Iran’s oil industry given that both companies are headquartered in Paris.

    Italy’s Eni also announced late last week that it is looking into Iran’s post-sanctions investment prospects, but emphasised that it had to first wait for Iran’s outstanding payments over its previous investments in the country’s oil industry to be settled.

    Schlumberger’ contract is one of the most prominent signed the US elections. The upcoming president-elect Donald Trump has vowed to undo the nuclear pact signed with Tehran last year by global powers. His pledge has led many international companies to freeze their plans to enter the Islamic Republic despite the country’s huge potential as an energy and consumer market.

    Though most international sanctions on Iran’s energy industry were lifted in January, Washington has maintained a ban on US companies and citizens from investing in Iranian oil fields.

    European oil giants have stepped into the breach, culminating with an agreement by France’s Total SA to join a $4.8bn investment in an Iranian gas field hours before Trump was elected.

    Despite uncertainty over what the president-elect will do over the Iran nuclear deal, Schlumberger is not the only one to pursue Iranian opportunities. Immediately after Trump’s election, Norway’s DNO signed up to study a key Iranian oil field near the Iraqi border.
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    OPEC: What’s There To Fight Over?

    Matthew M. Reed is Vice President of Foreign Reports, Inc., a Washington, DC-based consulting firm focused on oil and politics in the Middle East.

    Expectations are high that the November 30 OPEC meeting in Vienna will result in a supply pact requiring that some members cut production while others freeze theirs. Such a deal has proven elusive all year. It slipped away most dramatically in April, when a similar deal fell apart at the last minute. Since then, OPEC production has risen by 1.2 million b/d—meaning the Organization has added the equivalent of one more Algeria to the market (plus a little extra).

    This time, however, oil ministers from key member states all say they’re “optimistic” like never before. Iraq is maxed out and more inclined to seek a higher price per barrel today, while Iran’s production ceiling is within reach if not already achieved. These twin developments make it easier for OPEC to reach a deal now, as opposed to the last time OPEC met in June, but it’s far from a foregone conclusion. It’s now up to ministers to resolve the thorniest issues and find a formula that’s both impactful and durable.

    This time, however, oil ministers from key member states all say they’re “optimistic” like never before.

    Positive signals abound but the November 30 meeting will not be a cakewalk. To get a serious deal, Iraq and Iran must be brought on board; combined cuts must add up to more than one million b/d; and ideally non-OPEC producers, most importantly Russia, will reach separate follow-up agreements with OPEC. Only then does OPEC have a chance of balancing markets sooner and raising the revenue so many members desperately need.

    Iraq has resisted cuts all year, arguing that it must produce as much as possible to make up for years of sanctions and war and to pay for today’s fight against ISIS. But Baghdad changed its tone just days ahead of this week’s OPEC meeting. “Iraq is ready to cooperate with OPEC and cut production,” Iraqi Oil Minister Jabbar al-Luaibi was quoted last week. Prime Minister Haider al-Abadi was crystal clear too. “What we lose in lowering production we will gain in oil revenues,” he said. “Our priority is to raise the price of a barrel of crude.”

    A “fake” cut can’t be ruled out since it would at the very least create the appearance of harmony among OPEC’s top members.

    What’s less clear, and remains to be resolved in Vienna, is from which baseline Iraq will cut. This is because Iraqi officials claim all of Iraq, including Kurdish territory, is producing 4.776 million b/d, when secondary sources estimate that it’s producing 4.561 million b/d. The difference is material for an OPEC cut as it amounted to 215 thousand b/d in October and in recent months the gap has swelled to 300 thousand b/d. (As Platts has reported, Baghdad appears to be “double-counting” some oil that’s produced inside Kurdish-controlled territory.)

    OPEC is reportedly aiming for a production cut target of 4.5 percent. 4.5 percent of Iraq’s claimed output is equal to the gap between the higher official number and the lower secondary sources estimate. So if Iraq’s official—and possibly inflated—production number is the baseline for a cut, then Iraqi production might only be frozen at around 4.5 million b/d. No barrels would come off the market.

    A “fake” cut can’t be ruled out since it would at the very least create the appearance of harmony among OPEC’s top members. But behind closed doors the Iraqis will be pushed to accept secondary source estimates, since they have yet to convincingly refute them, and because it would require actual cuts. Using the secondary source estimates for October as a baseline, a 4.5 percent cut would shave 205 thousand b/d off Iraqi production. Add that amount to what Saudi Arabia and GCC producers can contribute—a plausible 800 thousand b/d—and the one million b/d threshold is feasible. Without Iraq, OPEC’s second-largest producer, it may be impossible.

    At home, when speaking to a domestic audience, Iranian officials have claimed higher production levels than they’ve reported to OPEC. They’ve even claimed that volumes today are higher than at any time since the Shah ruled Iran.

    Iran represents a real challenge because its messaging has been so confused in the weeks leading up to the Vienna meeting. At home, when speaking to a domestic audience, Iranian officials have claimed higher production levels than they’ve reported to OPEC. They’ve even claimed that volumes today are higher than at any time since the Shah ruled Iran. Statements like these should raise eyebrows when all year Iran has said it would not consider freezing or cutting output until production reached “pre-sanctions” levels, presumably those that prevailed in the mid-2000s. Simply put: Iran can’t claim victory and ignore OPEC. This disconnect isn’t necessarily disingenuous either. If you count crude oil andlighter condensates, the case can be made that Iranian production is at its highest level in decades.

    Is that good enough for Iran? Or are they confident production still has room to grow? There are good reasons to doubt that Iran can lift production much more. If Iran is effectively maxed out, will they concede that in Vienna—and at the very least commit to a freeze? I don’t know. They won’t say. Iran’s fellow OPEC members can only hope.

    In early February, just after prices had clawed back above $30/barrel and it was obvious OPEC was weighing intervention, I wrote the following: “OPEC needs three things to secure a meaningful production cut: unity among its top five members [Saudi Arabia, Iraq, Iran, Kuwait and the UAE], even if it requires a special arrangement for Iran; confidence in baseline production numbers from which members will cut, which are subject to dispute and possibly oversight; and sustained and significant declines in North American production.”

    Those conditions hold true if the goal is balancing the market and raising prices. But almost 10 months later, Iraq and Iran are still toss-ups and U.S. oil production has stalled around 8.8 million b/d. The EIA forecasts that American production will tumble by only another 100 thousand b/d in 2017. Going forward, OPEC can’t expect the U.S. to contribute much more in terms of involuntary cuts, after production fell by 600 thousand b/d from 2015 to 2016.

    Any deal is better than no deal for OPEC. In fact, with expectations high, failure this time around could seriously undermine prices. But the best possible deal is one that somehow incorporates Russia. While U.S. production fell over the last year, Russian output surged, averaging 10.73 million b/d in 2015 and surging to 11.2 million b/d in late 2016—coincidentally making up for lost American crude.

    There’s some debate inside Russia about whether these volumes are sustainable but OPEC can’t begin to engage Moscow until it gets its own house in order first.

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    Libya’s oil production: signs of continued gains

    Wood Mackenzie’s latest study on Libya’s oil production shows the country’s output has doubled from 300,000 barrels a day in early September to close to 600,000 barrels a day today, adding to the global oil supply glut.

    Although an OPEC member, Libya’s output has fallen so drastically it won’t be bound by any production restrictions. The country will seek to recover its lost market share, notably in southern Europe where refineries prize its light, sweet blends.

    “Libya’s oil production increases have occurred despite the absence of a political agreement between competing administrations, and an ongoing security vacuum,” said Martijn Murphy, research manager at Wood Mackenzie.

    Murphy said there are signs recent production gains could be sustained. These include the demise of the widely disliked Petroleum Facilities Guard (PFG) in the east, military success against IS in Sirte and western incentives to reverse Libya’s parlous state. Much will depend on the success of Libya’s state oil company, the National Oil Corporation, in depoliticising the country’s oil.

    “Longer term, Libya will take significant time and investment to get back to pre-war levels of 1.6 million barrels a day. Upstream facilities in the east have suffered much damage over the last two years, as have ageing midstream pipelines. Storage tanks will have to be rebuilt at Libya’s largest oil port, As Sidra, following rocket attacks there,” said Murphy.

    “Before committing new capital investment to Libya, independent oil companies (IOCs) will want to see a durable political agreement, functioning government institutions and the restoration of security – all currently a long way off. Libya’s national oil company will also have to secure funding for its 50% stake that it has in most projects, or fund its share with crude in kind,” adds Murphy.

    Much uncertainty remains, but for the moment, Libya’s production recovery offers much-needed revenues for the state and at least the hope a corner has been turned. Despite UN-sponsored efforts to bring about a political agreement and unity government, Libya remains a divided country.

    Wood Mackenzie’s analysis considers recent geo-political factors that led to the increase in Libya’s oil production.

    On 11 September, General Haftar, affiliated to the eastern House of Representatives administration, took the ports from the PFG and handed them over to the National Oil Corporation. The state oil company, applauded for its neutrality throughout the civil conflict , quickly lifted force majeure on the ports and increased production from many of its fields in the Sirte Basin. In addition, fields with participation from IOCs including ConocoPhillips, Marathon, Hess and Wintershall have also restarted production for the first time in almost two years. This has led to today’s production levels approaching 600,000 barrels a day.

    However, without the reopening of the country’s western export pipeline, Libya may be approaching the upper limit of its near-term production capacity. Reopening the western pipeline to Zawiyah could add an extra 200,000 to 300,000 barrels a day near term, ramping up to full capacity of 470,000 barrels a day within two years. Western infrastructure is newer and unlike As Sidra and Ras Lanuf in the east, Zawiyah hasn’t suffered any damage.

    Achieving the National Oil Corporation’s target of 900,000 barrels a day by the end of the year will depend on ending the blockade of the western pipeline. It remains unclear whether the tribes of Zintan’s demands can be met in the absence of a national political agreement.
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    Indonesia Has $10 Billion At Risk With Oil And Gas Dilemma

    $10 billion worth of potential upstream oil and gas output is at risk in Indonesia

    Indonesian workers arrange barrels of oil at a distribution station of the state-owned oil company Pertamina in Jakarta, Indonesia. (AP Photo/Tatan Syuflana)

    Some $10 billion worth of potential upstream oil and gas output is at risk in Indonesia with 35 production-sharing contracts (PSCs) set to expire in the next decade.

    “The lack of clarity on extensions, and the scale of production at risk, make expiring PSCs one of the biggest issues facing Indonesia’s upstream sector,” energy research company Wood Mackenzie said in its latest report Indonesia’s Expiring PSCs: $10 Billion Of Potential Upstream Value.

    As I wrote earlier this year, Indonesian NOC Pertamina is unashamedly targeting many of the expiring legacy production contracts largely operated by the IOCs in an effort to boost its domestic output. The 35 expiring PSCs make up over 1 million barrels of oil equivalent per day (boe/d) of output says Wood Mackenzie.France’s Total and Japan’s Inpex, as well as US companies Chevron, Talisman and ExxonMobil all have blocks expiring in the next five years.

    To help meet its long-term production target, Pertamina has set its sights on the expiring contracts. This is largely because they will be the cheapest barrels the company will ever produce, but also because they are generally the easiest to operate.

    “Assets such as Offshore Mahakam, Corridor and Jabung would be of interest to Pertamina as these are material gas exporting projects with exposure to LNG and piped gas contracts,” Alex Siow, an Indonesian upstream specialist at Wood Mackenzie said.
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    Oil and gas royalties may have been underpaid, Australian audit office finds

    Oil and gas companies operating in Australia may have wrongly claimed billions of dollars in tax deductions in recent years, leaving governments underpaid millions of dollars in royalties.

    The Australian National Audit Office has released a report, Collection of North West Shelf Royalty Revenue, which finds “significant shortcomings” in the framework for calculating royalties levied on off-shore petroleum operations from the north west shelf (NWS) off Western Australia.

    The NWS project accounts for over a third of Australia’s oil and gas production.

     Australia must catch up with other countries on how it taxes gas

    It is a joint venture between seven major international companies including Woodside Energy, BHP Billiton Petroleum, and Chevron Australia.

    The ANAO report found the administrative arrangements for royalty payments from the NWS project were so bad that it was impossible to know how accurate the royalties calculations had been.

    It said the consolidated royalty schedule, which governs how royalties are calculated, had not been updated in the last 10 years. It also said oil and gas companies had been claiming deductions for things that were not permitted.

    “On this basis, the ANAO has doubts about the eligibility of deductions claimed for the cost of debt and equity funded capital, excise paid on crude oil and excise paid on condensate,” the report warns. “There has been limited scrutiny of the claimed deductions.

    “Some errors in the claiming of deductions have been identified, but the available evidence indicates that the problems are much greater than has yet been quantified.”

    The report said the Western Australian government had commissioned consultants to investigate some deductions claimed by oil and gas companies, and they found $8.6m in underpaid royalties to date.

    It said that investigation provided valuable information but a comprehensive review of claimed deductions had not been commissioned.

    “The full extent of any errors in the calculation and payment of royalties has been been quantified,” the report said, adding that “significant effort” was required to resolve the status of another $281.4m in operating expenditure deductions and $21.1m in capital expenditure deductions.

    The report said more than $5bn worth of deductions were claimed against petroleum revenues in the 18 months to December 2015. It said revenue reported by producers from NWS petroleum sales in the same period was $19.7bn.

    From this, $1.9bn in royalties was collected. The Australian government retained $600m (32.3%) and the remaining $1.3bn (67.7%) was paid to Western Australia.
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    Sasol allays fears on US project

    Sasol chairman Mandla Gantsho last Friday moved to allay shareholder fears about the escalating costs of the company’s Lake Charles Chemicals Project (LCCP) in the US.

    Gantsho told shareholders that because the project occupied a strategic position, it would improve Sasol’s competitiveness. The project includes an ethane cracker that will produce 1.5 million tons of ethylene annually.

    Read also: Sasol opens polypropylene expansion project

    The complex also includes six chemical manufacturing plants. About 90 percent of the cracker’s ethylene output will be converted into a diverse slate of commodity and high-margin speciality chemicals for markets in which Sasol has a strong position.

    “(The project) occupies a very competitive position in the global ethylene cost curve,” Gantsho said. “It will transform the whole Lake Charles complex where we already have some assets that are operating by the way. That site will be transformed into a multi-asset site that will allow fixed and infrastructure costs to be spread over a number of other products and product lines.”

    Sasol said the project would roughly triple the company’s chemical production capacity in the US. Estimated at $11 billion (R155bn), the project is under construction near Lake Charles, Louisiana in the US, adjacent to Sasol’s existing chemical operations.

    In August Sasol announced that the costs of the project had escalated by $2.1bn from original estimate at the time of final investment decision in October 2014.

    Responding to a question by shareholder, Theo Botha about the cost overruns, Gantsho said: “Despite the cost estimate increases, we as the board still consider the LCCP to be a very important and strategic investment. We believe that the LCCP will return value to our shareholders.”

    The project would create opportunities for investment in additional downstream chemicals facilities, said Gantsho.

    The ethylene produced in the facility would be used in six downstream plants on-site to produce high-value derivatives such as ethylene oxide, mono-ethylene glycol, ethoxylates, low density and linear low density polyethylene.


    “So when you look at the cost of the project, you have to look at what else is coming up in terms of additional investment,” he said.

    Gantsho said the cost overruns were not symptomatic of Sasol’s project execution history. The company had previously executed big projects below cost and ahead of schedule, he said, citing the synfuels progressive expansion project, known as the Secunda Growth Programme and the Mine Replacement Programme, which entailed the replacement of ageing mines.
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    China’s Oct LNG imports rise YoY

    Liquefied natural gas imports into China, the world’s largest energy consumer, rose 15.1 percent in October year-on-year, according to the General Administration of Customs data.

    China imported 1.84 million mt of the chilled fuel in October, as compared to 1.6 million mt in 2015, the data shows.

    According to the data, China paid about US$645 million for LNG imports in October, down 2.2 percent on year.

    The LNG import figures in the January-October period rose 25.4 percent on year.

    The data reveals that China imported 19.7 million mt of the chilled fuel in the mentioned period as compared to 15.7 million mt the year before.

    China started importing LNG in 2006 and is currently the world’s third largest LNG importer– representing about 8% of global LNG imports in 2015.

    The country’s LNG imports are expected to significantly rise in the next five years as it as it is seeking to cut its addiction to coal to reduce pollution.
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    Oil investors have $490billion riding on big OPEC decision

    After two tough years of falling oil prices and company valuations, investors in the world’s biggest energy producers have some cause for hope as crude prices continue their recovery from a 12-year low. They will be looking to OPEC not to dash it.

    Oil companies around the world have together added $490 billion to their market value this year, the biggest gain in six years following a 25 percent rise in benchmark Brent crude, according to data compiled by Bloomberg. This follows a $850 billion loss in value last year and $720 billion in 2014 as crude prices plunged.

    The oil slump has hammered producers around the world, from giants like Royal Dutch Shell Plc to exploration minnows. They have piled on debt, canceled billions of dollars of projects and slashed jobs to ride out the downturn. In September, the Organization of Petroleum Exporting Countries gave these companies hope by reversing a two-year policy of pumping at full throttle and agreeing instead to cut production. Yet, the group is struggling to overcome obstacles to implementing the deal.

    “We all know what the oil companies are hoping for — a cut,” said Brendan Warn, a managing director at BMO Capital Markets in London. “The companies have become leaner and meaner than they have ever been, but they would still be looking at OPEC closely. It’s one of the most important OPEC meetings.”

    The Bloomberg World Oil & Gas Index of 58 companies is up 12 percent this year, the largest gain since 2009 following two years of declines. Exxon Mobil Corp., Chevron Corp., Shell, Total SA and BP Plc have all increased this year. Energy companies are the second-best performers in the MSCI World Index after languishing at the bottom in 2015.

    The year didn’t start so well. Brent crude fell as low as $27.10 a barrel in January, the lowest since November 2003, as OPEC kept its taps open and production from Russia and the U.S. was increasing. Saudi Arabia, which had led OPEC’s free-flowing oil policy, changed course in September amid increasing domestic financial pressure and the group decided to cut production for the first time in eight years.

    Oil bosses could be forgiven for hoping OPEC members resolve their differences, since every dollar increase in crude raises BP’s annual adjusted profit by about $300 million, according to the company’s website.

    CEOs from BP’s Bob Dudley to Shell’s Ben Van Beurden have reduced their operating costs by renegotiating contracts, making projects smaller and cutting workers. Next year, they’ll be able to balance their cash sources and spending at about $50 to $55 a barrel. Brent traded at about $47 on Monday.

    “It’s one thing to hope and another to plan your business for the future,” Warn said. Regardless of the outcome of the OPEC talks “the companies will be focusing on the things they can control, like efficiency and costs.”
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    Another pipeline attack in Nigeria

    Another pipeline attack in Nigeria


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    Low Oil Prices Create $1 Billion Business Killing Old Fields

    Low crude prices that have been hammering oilfield service companies for the past two years might be ready to give a little back.

    Sinopec Oilfield Service Corp., Keppel Corp. Ltd. and others will have a chance to fight for $1 billion a year in new business in Asia as the crude crash forces energy producers to decommission aging and unprofitable fields, industry analyst Wood Mackenzie Ltd. said in a new report. More than 600 fields, mostly in China, Australia, Indonesia and Malaysia, could be shut down over the next decade.

    The decommissioning represents an opportunity for oilfield service firms to rebuild their business after two years of layoffs and cost-cutting as the crude plunge caused a drop in drilling and exploration, the main activity for these firms. The Bloomberg World Oil & Gas Services Index has dropped 40 percent since the summer of 2014, compared with a 12 percent gain in the S&P 500.

    “There’s been a lack of the traditional activity for service companies, like drilling and exploration,” Andrew Harwood, Wood Mackenzie’s director for Asia upstream research, said in Singapore. “Maybe this is an opportunity to fill the gaps.”

    Decommissioning oil fields can be as simple as plugging an old well on land or as complicated as disassembling complicated subsea infrastructure, said Jean-Baptiste Berchoteau, an upstream analyst with Wood Mackenzie in Singapore. Poorly done work can leave oil leaking, causing environmental damage for years. Most of the fields are producing little or no oil, so the decommissioning won’t have much impact on global supply and demand balances.

    Regulations regarding decommissioning vary from country to country. Wood Mackenzie sees Australia and Thailand having clear rules in place, while China, Indonesia and Malaysia have murkier controls on issues like liability. Lack of clear regulations could make it more difficult for companies to obtain financing to decommission fields in those countries.

    Oil prices will go a long way in determining how quickly decommissioning work ramps up, Berchoteau said. Wood Mackenzie sees oil trading in the $50 to $55 a barrel range in 2017, which would speed up the process. A rebound in prices could make companies delay shutting some fields to try to eke out a few more barrels. Brent futures traded 21 cents lower at $47.03 a barrel at 7:27 a.m. London time.

    “There will be work for everyone,” Berchoteau said. “The cake is big enough for a lot of people to eat from it.”
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    OPEC Seeks Oil Deal as Saudis Open Door for No Output Cut

    OPEC is embarking on a last-ditch diplomatic push to reach a production cut, with ministers flying to Russia for talks, as Saudi Arabia for the first time suggested the oil-club doesn’t necessarily need to curb output.

    The Organization of Petroleum Exporting Countries will meet on Wednesday in Vienna to try finalize the terms of its first production decrease in eight years. Yet the group remains divided about how to share the curbs internally and Khalid Al-Falih, the Saudi oil minister, has opened the door to leave the group’s production unchanged.

    We expect demand to recover in 2017, then prices will stabilize, and this will happen without an intervention from OPEC,” Al-Falih said in Dhahran, eastern Saudi Arabia, on Sunday, according to the Saudi newspaper Asharq al-Awsat. “We don’t have a single path which is to cut production at the OPEC meeting, we can also depend on recovery in consumption, especially from the U.S.”

    Brent crude fell 0.1 percent to $47.19 a barrel by 5:08 a.m. in London amid skepticism OPEC will reach an agreement to cut production.

    Al-Falih’s comments came two days after Saudi Arabia decided not to attend a meeting with non-OPEC producers, including Russia, scheduled for Monday because of internal divisions within the group. The meeting was later canceled and instead OPEC officials will meet in Vienna to bridge their differences ahead of the ministerial gathering on Wednesday.

    “It’s not beneficial to attend the meeting with producers from outside OPEC before holding meetings within OPEC and deciding whether to cut or continue with current levels of production,” Al-Falih said, according to Asharq Al-Awsat.

    Russia Help

    As OPEC tries to resolve it’s own differences, with Saudi Arabia, Iran and Iraq at odds, the group is also asking other big producers such as Russia to reduce output too. Russia has so far resisted OPEC’s request that it joins the cut, offering instead to freeze production at its current level.

    In an unexpected move, Algerian Energy Minister Noureddine Boutarfa, one of the architects of OPEC’s September accord to reduce output, and Venezuela’s Eulogio Del Pino, a regular intermediary in the group’s discussions, will meet in Algiers and then travel to Moscow on Monday, according to two delegates familiar with the matter. They asked not to be identified as the talks are private.

    OPEC is also proposing a 600,000 barrel a day output cut by non-OPEC producers. Russian Energy Minister Alexander Novak has repeatedly said his country prefers to freeze rather than reduce output.

    Internal Differences

    While efforts to secure the cooperation of non-members continue, OPEC nations are still trying to agree among themselves about how much each should cut. The organization, which had planned to hold technical discussions with non-members on Monday, will instead hold an internal meeting to resolve the differences.

    Algeria’s Boutarfa presented Iranian Oil Minister Bijan Namdar Zanganeh with a proposal for a collective cut of 1.1 million barrels a day in Tehran on Saturday. Iran had previously said it should be allowed to continue increasing production as its exports recovered from nuclear-related sanctions that were eased in January.

    Boutarfa will also meet with his Iraqi, Saudi and Qatari counterparts in Vienna ahead of the OPEC ministers’ meeting on Wednesday, according to the state news agency Algerie Presse Service. Failure to reach a deal could lead oil prices to drop below $40 a barrel, APS reported, citing Boutarfa. Iraq has said it will participate in output curbs, having initially resisted joining in the effort.

    However, Iraq hasn’t clarified how big a production it’s willing to make.

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    Iran eyes Maersk help to cut gap with Qatar

    Maersk is also interested in developing Iran's deepwater hydrocarbon reserves in the Caspian Sea.

    The National Iranian Oil Company (NIOC) says it is in talks with Denmark’s Maersk Group to extract oil from the world’s largest gas field known as South Pars in Iran.

    Negotiations have been held for the second phase development of the South Pars oil layer, NIOC Deputy Managing Director Gholam-Reza Manuchehri told reporters in Tehran Wednesday.

    “Using modern technologies and horizontal drilling in view of the heaviness of the oil at the South Pars layer are the most important development scenarios for this oil field which is shared with Qatar,” he said.

    NIOC plans to drill 300 wells at the South Pars oil layer, which requires improved recovery (IOR) and enhanced recovery (EOR) technologies to reach crude oil.

    Only a few international companies are in possession of such technologies, with the Danish company considered to be a “powerful” candidate for the development of the South Pars oil layer, Manuchehri said.

    “Negotiations with the Danish company are underway but nothing is final yet,” he said.

    As in gas extraction, Qatar is ahead of Iran in developing the oil layer, having already completed the drilling of 300 wells which started production in 1991, according to Manuchehri.

    “Iran would need at least two-thirds of this amount of drilling to increase production from the oil layer to 200,000 barrels per day over a period of 20 years,” he said.

    An aerial view of a development phase in Assaluyeh where gas from the South Pars field is brought for processing (Photo by Shana)

    Maersk Group is cooperating with Qatar in the shared field which the tiny Persian Gulf country calls North Dome.  

    Manuchehri said the development of the South Pars oil layer is among the Iranian Ministry of Petroleum’s priorities, to be offered under the new oil contract model.

    Iranian companies are working on the first phase of the project and expect to pump 35,000 barrels of oil a day before the end of the current Persian year in March 2017.

    South Pars is the world's biggest gas field with 30 trillion cubic meters of reserves, divided to 24 phases on the Iranian side for development. Iranian companies are currently carrying out the gas phases but they look for a foreign partner to bring the oil layer to operation.

    Maersk is also interested in developing Iran's deepwater hydrocarbon reserves in the Caspian Sea, Minister of Petroleum Bijan Zangeneh said in January during a visit to Tehran by Denmark’s Foreign Minister Kristian Jensen.

    The Danish company has already been involved in deepwater oil drilling the Caspian Sea for Azerbaijan. Maersk has also experience in building world-class FPSO vessels for floating oil and gas production, storage and offloading oil and gas, which Iran needs at the South Pars oil layer.

    Iran has offered four projects in the Caspian Sea, blocks 24, 26 and 29, as well as the Sardar-e Jangal oil field to foreigners for exploration and development.
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    Russia cements leading China oil supply position

    Russia is cementing its position as the main oil supplier to China, the world's biggest net importer and growth market for the fuel, taking over the lead from Saudi Arabia in the first 10 months of the year, customs data showed on Friday.

    Russia also took the monthly lead back from Angola, which briefly had top supply spot to China in September, the data showed.

    Chinese crude oil imports from Russia in October climbed 39 percent on a year earlier to 1.12 million barrels per day (bpd), making it the biggest supplier. That also left it the largest supplier over the first 10 months of the year, totaling around 1.03 million bpd in that period, customs data showed.

    China's total crude oil imports in October have, however, dropped from a record high the previous month to their lowest on a daily basis since January. Independent refineries have cut back purchases because of higher prices and tighter government controls into their import activities, which are highly regulated.

    Crude oil imports from Iran in October also rose, jumping 129 percent year-on-year to 773,860 bpd, while imports from Iraq rose 60 percent to 875,400 bpd.

    Imports from Saudi Arabia, traditionally the biggest supplier to China, eased 0.28 percent to 935,800 bpd.

    The data comes just days ahead of a Nov. 30 meeting of the Organization of the Petroleum Exporting Countries (OPEC) to finalize a planned production cut aimed at propping up prices, which continue to languish below $50 per barrel due to oversupply.

    Exemptions to the planned cuts were given to Libya and Nigeria, where output has suffered from conflict, and sanctions-hit Iran.
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    Cold Snap Makes EU Tap Its Gas Reserves at Faster Pace: Chart

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    A colder-than-normal start to the winter boosted Europe’s demand for natural gas while a 16 percent increase in prices since the start of the heating season on Oct. 1 encouraged traders to tap fuel stored at lower cost during the summer. 

    Storage sites are being depleted at a faster pace than normal before the coldest months arrive, according to data from Gas Infrastructure Europe.

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    Saudi exports increase


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    Novatek courting Japanese investors with Arctic LNG projects

    Yamal LNG operator, Novatek is looking to Japan as it looks to secure additional funds for its Arctic LNG project.

    In an interview with The Nikkei, Novatek CEO, Leonid Mikhelson said that the company’s business could be a core point in economic cooperation between Japan and Russia.

    One of the projects Novatek is proposing is the Arctic LNG 2, with a targeted production of 12 million to 16 million tons per year. Operations are predicted to start in 2025.

    Mikhelson said the company would prefer to see Japan as a partner in the project, from gas production to the construction of the LNG facility, as well as management and sales, with a portion of the plant’s output landing in Japan.

    A €1 billion (Approx: US$1.05 billion) joint loan between the Japan Bank for International Cooperation and European financial institutions could soon be agreed for the Yamal LNG project.

    Mikhelson added that the arrangement could be reached in time for the visit of Russian president Vladimir Putin, to Japan, scheduled for mid-December.

    The report shows that 30 cooperation points have been set for implementation during Putin’s visit to Japan, with Mikhelson adding that Novatek’s LNG projects could find their place among those 30 priorities.

    In September, JBIC and Novatek signed a memorandum of understanding to cooperate on liquefied natural gas projects.
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    Saudi Aramco to supply more oil to Asia in January: sources

    State oil giant Saudi Aramco has agreed to supply some customers in Asia with incremental crude that will load in January, as it holds to a strategy of maintaining market share, three sources with knowledge of the matter said on Friday.

    The decision by the world's top exporter to give extra oil came weeks before Saudi Aramco was due to notify customers of their monthly supply allocation. For January supplies, allocations would have been made only around Jan. 10.

    By exercising flexibility to meet customers' demand, Saudi Arabia is signaling that it won't budge on market share even as it works with members of the Organization of Petroleum Exporting Countries to finalize plans for a production cut at their Nov. 30 meeting, the sources said.

    "We're going into winter so we need lighter grades," said an official with a North Asian refiner who spoke on the condition of anonymity.

    "It's just as usual. There is no indication of a change in their behavior (in giving additional supplies)," he said.

    Saudi Aramco could not be immediately reached for comment as its office is closed for weekend.

    The excess Saudi supplies, combined with a rise in arbitrage inflow from Europe and the United States, have depressed Asia's demand for similar quality light sour crude such as those from Abu Dhabi.

    Aramco is selling more January Arab Extra Light crude, a second source with a North Asian refiner said.

    "CPC Blend, Forties, there are a lot of replacement barrels," he added.

    Demand for Saudi Arab Extra Light crude has been robust in Asia because of its competitive pricing and its higher yield of naphtha, which is used to produce petrochemicals.

    Refiners' profits for producing naphtha are at their highest since April, Reuters data showed.

    Some Asian refiners have also requested to lift more Arab Medium crude in January although Saudi Aramco has yet to commit to an increase, trade sources said.

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    Neuquen governor vows to defend high oil, gas prices in Argentina

    The governor of Argentina's Neuquen province, Omar Gutierrez, said Thursday he has asked President Mauricio Macri to keep domestic oil prices above international ones and provide gas pricing incentives to help to boost production after more than a decade of decline.

    Gutierrez made the comments after meeting late Wednesday in Buenos Aires with Macri and national Energy Minister Juan Jose Aranguren.

    Neuquen has emerged as a hot spot for shale oil and gas, holding some of the world's largest resources in huge plays such as Vaca Muerta.

    The southwestern province, which produces 20% of the country's 514,000 b/d of oil and 48% of its 124 million cu m/d.

    Gutierrez said he would defend "a price of oil without a roof and a floor" to encourage development of the resources.

    Macri's government plans to bring domestic crude prices in line with international benchmark references, and has been working to reach that by the middle of 2017.

    However, this month it emerged that the target would be reached this month.

    That would mean cutting domestic prices by 30% to less than $45/b , ending a government-orchestrated agreement between refiners and producers to sustain the price by allowing diesel, gasoline and other products to be priced accordingly.

    Macri's government has not announced the plan publicly and said in a statement that the meeting with Gutierrez was for pushing ahead with the creation of a federal energy development plan.

    The Energy Ministry, which sets energy pricing policies, declined to comment on the meeting. VACA MUERTA

    The governor also told Macri and Aranguren of his plan for developing the Neuquen Basin so the country can regain the energy self-sufficiency it has lost on declining production since the late 1990s and early 2000s.

    Oil production has declined by nearly 40% since a peak of 847,000 b/d in 1998 while gas has dropped 13% from a record 143 million cu m/d in 2004, mostly because of low investment and maturing conventional reserves.

    As well as sustaining domestic oil prices at around $63/b, Gutierrez urged the government to extend pricing incentives for gas production to 2020.

    The incentives allow producers to sell output from new developments like Vaca Muerta and tight plays such as Lajas and Mulichinco at $7.50/MMBtu, more than the average price of $4.75-$5.00/MMBtu.

    With the oil and gas pricing guarantees from the national government, companies will be able to plan investments for the next few years, including in the infrastructure needed to sustain a recovery in production led by Vaca Muerta, Gutierrez said.

    YPF, the country's state-run energy company, is producing about 58,200 b/d of oil equivalent from Vaca Muerta and about 10 million cu m/d of tight gas from other plays.

    YPF has said $50/b is a break-even price for Vaca Muerta, and it has been focusing on ramping up productivity and cutting drilling and completion costs to make its projects more economically viable. CHUBUT

    With Vaca Muerta gaining the attention of oil companies, other provinces such as Chubut are concerned about a pullback in drilling activity in their fields. On Thursday, Chubut Governor Mario Das Neves called a meeting with oil officials and union leaders from his province and from Mendoza, Salta, Santa Cruz and Tierra del Fuego to discuss Macri's plans to cut oil prices.

    They will meet November 30 in Rawson, Chubut to draft a plan to defend keeping local oil prices at around $63/b, according to a statement.

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    Argentina plans railway to help lower shale drilling costs

    Argentina's national government is in the preparatory stages for equipping an aging railway and laying new train tracks to service the Vaca Muerta shale play.

    Jorge Ocampos, a legislator in the province of Rio Negro, made a presentation of the $1.2 billion project late Wednesday, according to a statement Thursday.

    The railway is to run from the port city of Bahia Blanca in Buenos Aires province through Rio Negro to Anelo and Rincon de los Sauces, a town and city at the heart of Vaca Muerta activities in the southwestern province of Neuquen.

    The project also includes building more roads and highways, Ocampos said in the statement.

    While there is no start date for the project, Ocampos said the cargo train is scheduled to be in operation in five years, citing a plan drafted by the national Ministry of Transport.

    The ministry did not respond to a request for further information.

    The Diario Rio Negro newspaper reported that the project involves revamping 1,300 km of lines from Bahia Blanca to Neuquen City, and laying 250 km of new tracks from Chichinales, Rio Negro to Anelo and Rincon de los Sauces.

    The train would help lower the cost of moving proppant for fracking from national or foreign suppliers, the paper reported, citing unnamed sources in the Ministry of Transport.

    With the project, the government wants to increase the transport speed to 90 km/hour, and run eight to 10 trains per day, the paper said.

    Argentina's conservative government under President Mauricio Macri is betting on Vaca Muerta and other unconventional plays to turn around more than a decade of decline in oil and gas production.

    Vaca Muerta has drawn comparisons to the prolific Bakken and Eagle Ford shale plays in the US for its potential, luring majors like Chevron, ExxonMobil and Shell to start drilling.

    Argentina's state-run YPF is leading the development in a partnership with Chevron, producing about 58,200 b/d of oil equivalent.

    YPF has slashed drilling and completion costs to $9.5 million per well in the third quarter from $11 million in the third quarter and $16 million when it started developing Vaca Muerta in 2012.

    The proposed cargo train and more infrastructure capacity to move proppant in and oil and gas supplies out are considered keys for cutting costs to a government target of $7 million per well, making the play more economically viable for development.

    Ocampos said that the national government is buoyant about Vaca Muerta's potential.

    "A rise in the price of oil is expected," the legislator said in reference to global prices. "This will improve the expectations for Vaca Muerta."
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    NNPC: 224 firms bid to buy crude

    A total of 224 companies yesterday bided to buy Nigerian crude through the 2016/2017 Nigerian National Petroleum Corporation (NNPC) Crude Term Contract.

    Speaking with reporters at the bid opening in Abuja, the Group Managing Director, Dr. Maikanti Baru, said the number of companies that will emerge from the bidding will be a factor of actual production focus in February next year.

    He said: “The companies to emerge from the bid would be decided on actual production focus around February when the tenders are supposed to come in,” adding that the state-run oil firm selected about 37 companies from its bidding exercise last year.

    Baru however pointed out that the volume that the Federal Government would be offering for sale from the transaction will be about 600,000 barrel per day (bpd) from the Joint Venture operations.

    He added that 100,000 bpd would also be available from the transaction through royalties and taxes accruing from Production Sharing Contract (PSC).

    Baru said: “It is the volume that we get our JV operations that is about 600,000 barrels per day when you have full operations. We also have somewhere in the region of 100,000 barrel per day in terms of royalties and  tax that is accruing from the PSC operations. So these are the kinds of volumes we are expecting for next  year.”

    He said NNPC was looking forward to refiners,  gigantic traders and companies that have invested tremendously in the downstream oil sector.

    “We are targeting refiners and also big traders as well as companies that have made substantial investments in the oil and gas industry, particularly, downstream in Nigeria,” Baru said.

    He said it was untrue, rumours that the government was finding it difficult to get buyers for the nation’s crude, noting that Nigeria’s crude is hot cake, adding that it is very valuable because of its light nature and also yields several by products.

    Baru said contrary to the common opinion that the crude goes only to China, it goes to India and most European countries.

    The GMD said: “There is that speculation that we are suffering for markets. It is not quite true. Nigerians crude  has continued to earn premiums and they are hot cakes all over for refiners because of the light nature of the crude; it gives very high yields on the valuable products that are produced  from crude oil.

    “Nigerian crude continues to maintain the market. In fact, contrary to a lot of speculations that a lot of Nigerian crudes go to China, no, they don’t. Most of them are consumed in India and Europe, particularly this year and last year, most of Nigerian crudes end in European countries.”

    According to him, the ceremony marked the opening of the 2016/2017 bid tender for Nigerian crude under the NNPC on behalf of government for the people of Nigeria.

    He said the corporation is not signatory to the account of the proceeds but only plays the role of confirming the payment for the crude.

    He added that the proceeds from sale of crude goes directly to the Federation Account in the Central Bank of Nigeria (CBN).
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    Alternative Energy

    US ethanol crush margin reaches nearly two-year high

    The US ethanol crush margin continued to rise Thursday after reaching a nearly two-year high of 46.73 cents/gal Wednesday.

    The margin has not been as high since December 12, 2014, when it was 63.43 cents/gal.

    Chicago Argo, a benchmark for physical US ethanol, was heard trading for $1.66/gal Thursday morning, while the front-month CBOT corn futures contract traded for $3.3275/bushel, yielding a margin of 47.16 cents/gal.

    A simple crush margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce. The resulting number is the cost of corn per gallon of ethanol.

    The margin strengthened sharply on Wednesday, climbing 4.75 cents from Tuesday, as ethanol rallied on bullish weekly data from the US Energy Information Administration.

    Market participants had expected production to climb above 1.020 million b/d, but the data showed run rates fell 2,000 b/d to 1.012 million b/d. The longer production can hover below maximum capacity, the more time stocks have to draw before the typical build in the first quarter.

    Stocks also supported prices as they fell 504,000 barrels to more than a one-year low. "No one expected that big of a draw," said one source. Strong exports have kept demand for US ethanol high.
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    Daimler, BMW, Volkswagen Group, & Ford Sign superfast charging MoU in Europe

    A new joint venture has formed that will develop a high-power, EV fast-charging network in Europe has been signed by BMW, Daimler, Ford, and Volkswagen Group (including Audi and Porsche). In other words, these major auto companies are looking to finally catch up to Tesla on one of the most critical components of a healthy and vibrant electric vehicle ecosystem.

    This newly signed Memorandum of Understanding (MoU) will reportedly see the firms cover common long-distance travel routes in Europe with high-power DC electric vehicle (EV) fast-charging stations that offer up to 350 kW in power. (For comparison, current non-Tesla EV “fast chargers” max out at 50 kW, while Tesla’s max out at 120–135 kW.)

    The planned buildout — based on the Combined Charging System (CCS) standard — will reportedly involve around 400 station locations.

    Work on the development of the network will begin sometime in 2017, according to the press release — with the goal being for there to be thousands of high-power charging points on the continent by 2020.
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    Shell studies green energy deals to prepare for future after oil

    Royal Dutch Shell, the world's second-biggest publicly listed oil company, is studying acquisitions in the green energy sector, its CEO told Reuters, as it bows to shareholder demands for a strategy beyond fossil fuels.

    Shell, which has a market value of $200 billion, produces two percent of the world's oil and gas but rapid technological change coupled with policies to protect the climate have kick-started a shift in energy markets that has put enormous pressure on oil companies to plan for a time after fossil fuels.

    "The idea that you can just be a very clever observer and step in when the moment is right, forget about it," Shell Chief Executive Ben van Beurden told Reuters.

    "I am convinced that in this space we will play an active role, a leading role and we will plan acquisitions in it."

    Major investors, including Dutch pension fund PGGM, have criticised Shell's climate change policies in the past, saying the company should do more to mitigate climate change risks.

    "We don't just want them to pay lip service and do it because the industry is under pressure," said Rohan Murphy, co-manager of Allianz' Global Energy Fund, a Shell shareholder.

    "Shell do seem to be taking the issue of a less hydrocarbon dependent world seriously and are looking at it properly rather than just talking about becoming greener," Murphy said.

    Shell owns about 500 megawatts (MW) of onshore wind power capacity in the United States and has a growing biofuels business in Brazil which produces ethanol from sugar that is mixed with petrol and diesel to reduce carbon dioxide emissions.

    It also recently bid to build an offshore wind farm in the Netherlands in a consortium with two other Dutch companies.

    "Of course we do believe in renewables but probably more in building the utilities and integrating them into our existing operations," van Beurden said.

    That is where Shell's strategy appears to diverge from French oil company Total, which is often referred to as one of the most progressive oil company when it comes to moving away from fossil fuels.

    Earlier this year, Total splashed out $1.1 billion to buy Saft, which makes batteries to store solar energy, and bought a stake in AutoGrid, a startup that has developed a platform to optimize the use of home energy appliances.

    Total is also majority shareholder in SunPower, a manufacturer of highly efficient solar panels.

    While Total is focusing on investment in green energy technologies, van Beurden hinted that Shell would become an electricity and gas provider, through the integration of utilities. He said there may be value in delivering a service, rather than being the owner of a technology.

    In Britain, so-called demand aggregation is already a profitable business model. Aggregators secure commitments from businesses to cut their energy consumption and in return earn a fee from the network operator.

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    Dutch government proposes 33 percent increase in renewables spending for 2017

    The Dutch government on Wednesday proposed a 33 percent increase in its budget for renewable energy projects in 2017, as it attempts to catch up after lagging on its 2020 emission reduction targets.

    In a letter to parliament, Economic Affairs Minister Henk Kamp said the government plans to spend 12 billion euros on subsidies for solar, wind, geo-thermal and other projects in 2017, up from 9 billion euros in 2016 and just 3.5 billion euros in 2015.

    The Netherlands came under intense criticism in 2015 when a review showed just 5.6 percent of its energy had come from renewable sources the previous year and coal use was at a record high after three major new coal plants were brought on line.

    The European Union targets renewables production of 20 percent by 2020.

    In June 2015, a court found the government had also fallen behind on its greenhouse gas emission reduction commitments under the Kyoto protocol and ordered it to take steps to meet its target of a 25 percent reduction from 1990 levels by 2020.

    Several studies attributed the country's poor performance to erratic subsidy policies in 2006-2013 and underspending generally, prompting the escalation.

    In October of this year, Prime Minister Mark Rutte said that subsidy increases were paying off, particularly in wind energy, and the 2020 targets were "within reach" after all, though he stopped short of saying they would actually be achieved.
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    Contract for world’s cheapest solar power signed for Dubai mega-project

    DEWA has signed a US$29.90/MWh PPA with Masdar for the 800 MW third phase of the Mohammed bin Rashid Al Maktoum solar park.

    The United Arab Emirates (UAE) has seen some of the lowest-price solar power contracts in the world, which has led to a combination of disbelief and skepticism about the viability of the projects awarded.

    However, today one of these mega-projects took another step forward, with the Dubai Electricity and Water Authority (DEWA) signing a power purchase agreement (PPA) with the Abu Dhabi Future Energy Company (Masdar) for the third phase of a massive solar park in Dubai for a shocking US$29.90 per megawatt-hour.

    This PPA for the third phase of the Mohammed bin Rashid Al Maktoum Solar Park is the lowest price PPA globally known to pv magazine staff.

    In analyzing how Masdar can make a profit on such a low PPA, Bloomberg New Energy Finance Head of Solar Analysis Jenny Chase has cited several factors, including low capital and operating costs, capacity factors of 25%, and the ability to access debt at an interest rate below 4%. (Note: This project and others in the region were examined in detail in the November print edition of pv magazine.)

    And while US$29.90 sets a new benchmark, bids as low as US$24.20/MWh were submitted for an auction in Abu Dhabi in September.

    When complete, the Mohammed bin Rashid Al Maktoum Solar Park will be 3 GW in capacity. In July developers closed on financing for the second 200 MW phase, which they expect to complete in April 2017.

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    ERCOT sets new wind output record of 15,033 MW

    The Electric Reliability Council of Texas set a new wind-generation output record of 15,033 MW Sunday, topping 15,000 MW for the first time, the grid operator said.

    The record was set at 12:35pm CST Sunday and represented about 45% of total ERCOT electric demand at the time, according to an ERCOT news release.

    More than 8,800 MW came from wind farms in West and North Texas, 3,800 MW from the South region, such as the Gulf Coast, and about 2,300 MW from the Panhandle region, according to ERCOT.

    "We saw high wind output throughout the day, ranging from just over 10,000 MW during the late night hours to this peak output during the noon hour," ERCOT Senior Director of System Operations Dan Woodfin said in the news release. "Over the years, ERCOT has taken a number of steps, such as improving renewable generation forecasts, to allow us to operate the grid reliably on days like this."

    The portion of load served by wind ranged from about 35% to more than 46%, averaging nearly 41% throughout the day Sunday.

    ERCOT wind generation has totaled 137,300 MWh/d in November to date, which is down 6% from November 2015's average of 145,980 MWh/d.

    There is more than 17,000 MW of installed wind generation capacity in ERCOT. That number is expected to top 19,000 MW by the end of the year, ERCOT said.

    The previous wind generation output record of 14,122 MW was set November 17. The current wind percentage of load record is 48.28%, set on March 23.
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    China to use Australian solar thermal technology

    China would use Australian solar thermal technology to help reach its clean energy targets, after a licensing agreement was reached between Chinese company Thermal Focus and the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Xinhua reported.

    The agreement was announced at the Asia-Pacific Solar Research Conference at the Australian National University on November 29.

    China aims to produce 5 GW of concentrating solar thermal electricity by 2020.

    Larry Marshall, chief executive of the CSIRO, said the agreement would enable Thermal Focus to make, sell and install the CSIRO's patented solar heliostat technology and design software in China, while the shared revenue stream will be used to fund other climate research back in Australia.

    The heliostat technology uses a number of mirrors to concentrate reflected sunlight onto a receiver. The resulting beam is then used to heat "molten salt" which generates a super hot steam which, in turn, generates electricity through a turbine.

    The mirrors follow the path of the sun during the day, meaning the technology is one of the most efficient at producing electricity.

    Zhu Wei from Thermal Focus said the CSIRO's pedigree in solar thermal technology meant its designs were the most attractive to the Chinese market.

    "CSIRO's solar thermal technology combined with our manufacturing capability will help expedite and deliver solar thermal as an important source of renewable energy in China," he said.
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    S.Korea unveils new tariffs, incentives to boost renewable energy

    South Korea plans to provide new incentives for renewable producers and consumers as its seeks to double power from green sources to 11 percent of the country's electricity supply by 2025 from 4.5 percent last year.

    Seoul will implement a competitive market auction system for power producers as early as the first quarter of 2017, shifting away from the current feed-in-tariff system, the country's energy ministry said in a statement on Wednesday.

    The new system means utilities can buy electricity from renewable power producers via tenders and fixed-price deals for up to 20 years - helping green energy producers ensure stable profits.

    The move comes after Asia's fourth-largest economy said in July it would pump 42 trillion won ($35.85 billion) into meeting its pledge at the Paris Climate summit last year to cut greenhouse gas emissions by 37 percent by 2030.

    "The penetration rate of renewable energy sources is expected to grow up to 11 percent by 2025, and we can meet this goal 10 years earlier than we have aimed," Energy Minister Joo Hyung-hwan said at a meeting with power generators and companies.

    Joo said Korea's upcoming power supply plan, due to be released next year, will be more environmentally friendly in line with the country's new renewable plans.

    At present, utilities can purchase electricity from renewable producers at prices set by the government via feed-in tariffs (FIT). That has allowed producers to secure sales of renewable energy at fixed prices, but has not stoked lower prices through competition.

    "We are planning to set a long-term goal to generate 30 percent of our power with renewable energy sources by 2030," Lee Jong-sik, executive vice president of Korea Southern Power Co Ltd (KOSPO), told Reuters.

    In addition to the competitive auction system, the ministry will expand subsidies to cover up to 50 percent of the cost of installing solar power systems in homes and schools.

    With the new plans, the ministry expects green energy sources to supply 11 percent of the country's total electricity by 2025. The aim is to increase installed capacity of renewable energy power to 45.5 gigawatts (GW), from 13.7 GW in 2015.

    Korea currently generates nearly 40 percent of the country's electricity from coal, followed by nuclear power at 30 percent with the rest coming from oil, gas and renewable energy sources.

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    China to invest $174 billion in hydro and wind from 2016-2020: NEA

    China will spend at least 1.2 trillion yuan ($174 billion) on hydro and wind energy infrastructure between 2016 and 2020, the National Energy Administration (NEA) said in blueprint document for the two industries.

    NEA said construction of new wind farms would provide about 300,000 new jobs by 2020. In addition, the country aims to have a market-based subsidy system for the wind industry.
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    Closing arbitrage brings China ethanol imports to 17-month low of 1,191 cu m

    Chinese imports of ethanol in October fell to a 17-month low of 1,191 cu m, according to China customs data released Saturday, as declining domestic prices due to a glut of corn reduced trading opportunities into the country.

    In October, China imported 1,188 cu m of denatured ethanol from South Africa, and negligible volumes from a handful of other origins including the US, Japan and the UK.

    Denatured ethanol is typically blended into gasoline as part of biofuels mandates.

    These volumes are expected to pick up again in coming months, with a handful of cargoes heard trading from the US, loading in October and November.

    Meanwhile, the country also imported a very small volume -- 3,914 liters -- of undenatured ethanol, mostly from the US.

    Chinese ethanol exports remained marginal, totalling 3,121 cu m, including 1,636 cu m of denatured ethanol shipped to North Korea and 1,320 cu m of undenatured ethanol to South Korea.

    Traders are keeping a close eye on potential Chinese ethanol export flows, as domestic prices are lower than the rest of Asia.

    For dried distiller grains, or DDGs, Chinese imports fell over 50% month on month in October to 134,934 mt, from 272,240 mt in September. All of China's DDGS imports in October came from the US.
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    Fukushima nuclear decommission, compensation costs to almost double: media

    Japan's trade ministry has almost doubled the estimated cost of compensation for the 2011 Fukushima nuclear disaster and decommissioning of the damaged Fukushima-Daiichi nuclear plant to more than 20 trillion yen ($177.51 billion), the Nikkei business daily reported on Sunday.

    The trade ministry at the end of 2013 calculated the cost at 11 trillion yen, which was comprised of 5.4 trillion yen for compensation, 2.5 trillion yen for decontamination, 1.1 trillion yen for an interim storage facility for contaminated soil, and 2 trillion yen for decommissioning, the report said.

    The new estimate raised the cost of compensation to 8 trillion yen and decontamination to 4-5 trillion yen, the cost for an interim storage facility remained steady, and decommissioning will rise by several trillion yen, it added.

    The part of the cost increase will be passed on in electricity fees, it added, citing multiple unnamed sources familiar with the matter.

    Members of the media, wearing protective suits and masks, receive briefing from Tokyo Electric Power Co. (TEPCO) employees (in blue) in front of the No. 1 (L) and No.2 reactor buildings at TEPCO's tsunami-crippled Fukushima Daiichi nuclear power plant in Okuma town,... REUTERS/Toru Hanai/File Photo

    The ministry could not provide immediate comment.

    On March 11, 2011, a massive 9 magnitude earthquake, the strongest quake ever recorded in Japan, created three tsunamis that knocked out the Fukushima-Daiichi plant, causing the worst nuclear crisis since Chernobyl a quarter of a century earlier.

    The Ministry of Economy, Trade and Industry will discuss with the Ministry of Finance a possible expansion of the interest-free loan program from 9 trillion yen, to help support the finances of the Fukushima plant operator Tokyo Electric Power Co's, the report said.

    The cost of cleaning up Tokyo Electric Power's wrecked Fukushima-Daiichi nuclear plant may rise to several billion dollars a year, from less than $800 million per year now, the Japanese government said last month.

    The Mainichi newspaper reported in October that Japan's utilities lobby expects clean-up and compensation costs from the Fukushima disaster to overshoot previous estimates by 8.1 trillion yen.

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    ChemChina setting up $5 billion fund to help finance Syngenta bid

    ChemChina setting up $5 billion fund to help finance Syngenta bid

    China National Chemical Corp (ChemChina) is setting up a fund that will aim to raise $5 billion to help finance its purchase of Swiss seeds group Syngenta, two sources with direct knowledge of the matter told Thomson Reuters publication Basis Point.

    The financing structure entails investors committing to the fund, which would in turn own equity in Syngenta, the people said - a move that would help ChemChina lower the debt burden of its planned $43 billion acquisition.

    Overall, ChemChina is targeting about $25 billion in equity commitments to help fund the largest ever foreign purchase by a Chinese firm, the people added.

    Sources have previously said it has $32.9 billion in total debt commitments arranged with Chinese and international lenders. That level of gearing is, however, viewed as too high for comfort by lenders, investors and analysts alike.

    ChemChina has hired state-run Postal Savings Bank of China (PSBC) (1658.HK) to arrange the fund, the people added. The mandate is a coup for the bank as it only set up its investment banking department about a year ago.

    The sources declined to be identified as the discussions are confidential. Representatives for ChemChina did not respond to telephone and emailed requests for comment. PSBC declined to comment.

    In addition to the planned fund, ChemChina has secured $5 billion in equity from Feng Xin Jian Da LP, a fund managed by CITIC Trust Co Ltd, a unit of conglomerate CITIC Ltd, sources have previously said.

    It was not immediately clear in what other ways ChemChina aims to boost the equity financing portion of the deal.
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    Precious Metals

    India's Dec gold imports to halve as cash crunch squeezes demand

    India's overseas purchases of gold could halve this month after jumping to the highest level in 11 months in November because retail demand has faltered due to the government's move to scrap high-value currency notes, industry officials told Reuters.

    Lower imports by the world's second-biggest consumer of gold could weigh on global prices that are already trading near their lowest level in 10 months, although it would likely help the South Asian country trim its trade deficit.

    "In December gold imports could fall below 50 tonnes. Retail demand is very weak due to the cash crunch," Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, told Reuters.

    The November imports jumped to around 100 tonnes, highest since December 2015, Bamalwa said, as people with unaccounted wealth rushed to buy bullion following Indian Prime Minister Narendra Modi's shock withdrawal of 500 and 1,000 rupee banknotes to fight graft and "black money".

    The Indian government has also put strict limits on the amount of money people can withdraw from banks, although a larger sum, 250,000 rupees ($3,660), is allowed for weddings - a big driver of demand for gold - as long as participants can prove that the marriage is genuine.

    Anticipating curbs on gold imports, banks and other nominated agencies ramped up overseas purchases in mid-November, but demand plunged by the third week of the month due to the shortfall of currency notes, dealers said.

    "A significant chunk of November imports are still unsold. Import requirement for December is limited," said Sudheesh Nambiath, a senior analyst at metals consultancy GFMS, a division of Thomson Reuters.

    Indian jewellers rely on the wedding season for an uptick in demand during winter months after the end of key festivals such as Diwali. Weddings accounts for more than half of the country's annual demand for gold, according to GFMS.

    But the difficulties of getting enough cash have hit wedding demand hard and forced many consumers to exchange old jewellery for new, says Kumar Jain, vice president of the Mumbai Jewellers Association.

    "The demand will remain low for the next few months. It will take time to recover."
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    China Curbs Gold Imports To Slow Capital Flight

    While all eyes were on India (as rumors swirled of an imminent gold import ban), The FT reports that China curbed gold imports in the wake of government attempts to clamp down on capital leaving the country, according to traders and bankers.

    Some banks with licences have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.

    The hit to gold imports comes as China tightens restrictions on overseas deals by state-owned companies in an effort to limit capital outflows that has seen the renminbi fall to its lowest against the dollar in eight years.

    As The FT notes, quotas for importing gold have been cut during quarterly assessments this year. Banks also have dollar quotas, some of which must be used when buying gold.

    The limits on imports bite as the weakening renminbi raises Chinese investors’ interest in gold. Lower gold prices have also triggered more buying.

    The combination of tighter quotas and an uptick in demand caused the premium for gold in China over the international gold price to jump as high as $46 in the past few weeks, according to data from Wind Information. Normal levels are about $2 to $4.

    In an effort to ease that premium, Chinese banks have been allowed to import gold under their quotas using the offshore renminbi, one banker said. Although still high, the premium for gold on the Shanghai Gold Exchange has since fallen to $26, according to Wind data.

    If the restrictions on imports are sustained that could raise questions about China’s moves to open its gold market to international traders.The world’s largest consumer of the precious metal has moved to have a greater voice over the price of gold.
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    Indian cash crunch hits gold demand during peak wedding season

    Mumbai resident Shashikant Zhalte's wedding this weekend will be less sparkling than his family had hoped, thanks to a cash shortage following Indian Prime Minister Narendra Modi's shock withdrawal of high-value notes to fight "black money".

    Zhalte bought gold jewellery for his wife-to-be months ago, but had delayed purchases for his mother and sisters.

    Then came the Modi bombshell on Nov. 8, in the middle of the wedding season when gold demand spikes, forcing Zhalte to drop his plans to buy an additional 50 gms, worth around $2,200.

    The scenario is being played out across India, the world's second biggest consumer of gold, where it is customary to gift jewellery in marriages.

    The wedding season stretches from September to April, and Thomson Reuters-owned metals consultancy GFMS says it accounts for more than half of the country's annual demand for gold.

    More than two-thirds of that demand of around 800 tonnes a year comes from the countryside, where farmers are struggling to get enough cash to buy seeds and fertilisers in the sowing season. Penetration of credit or debit cards and money apps is very low in rural India.

    The resulting drop in incomes and tepid buying in the wedding season means gold imports, which spiked in the immediate aftermath of the banknote announcement amid panic buying, are likely to drop sharply in the coming months, said traders in India and in the supply hubs of Dubai and Hong Kong.

    "Instead of shopping, we were busy visiting banks and government offices to prove that there is a wedding in the family," said Rahul Ahire, a cousin of Zhalte.

    The Indian government has put strict limits on the amount of money people can withdraw from banks, although a larger sum, 250,000 rupees ($3,600), is allowed for weddings, as long as participants can prove that the marriage is genuine.

    Gold demand from India is not a major factor in global prices, but has historically provided support when the international market is falling.

    Gold is trading at its lowest levels in nearly 10 months in anticipation of a U.S. interest rate hike in December. Higher U.S. rates would boost the dollar and increase the opportunity cost of holding the metal.

    A senior official with a Hong Kong bank, which caters mainly to Indian and Chinese gold buyers, said that it was worrying that the slowdown in Indian buying was overlapping with an expected rate hike by the U.S. Federal reserve next month.

    "In the past, physical Indian demand gave support whenever there was a sharp fall in global prices," said the official. "Without Indian buying, prices could fall steeply."


    Surendra Mehta, secretary of the India Bullion and Jewellers Association, said imports would be "negligible" in December and January, but did not give any numbers.

    Traders said that a year ago India bought 182.2 tonnes in those two months, a figure that could fall to 60 to 70 tonnes this time around.

    "Retail demand is very weak and since prices are falling, jewellers are not willing to build inventory," Mehta said. "They are postponing purchases."

    Another factor that could hit imports is a plan reportedly being considered by the government to impose curbs on domestic holdings of gold. A third of India's gold demand is paid for by unaccounted money.

    The scrapping of 500 and 1,000 rupee banknotes, or 86 percent of the value of cash in circulation, is part of a crackdown on corruption, tax evasion and militant financing.

    But brokerage Ambit Capital says the decision could pull down economic growth, which was 7.6 percent last year, by as much as 4.1 percentage points in the year to March 2017.

    "It wasn't possible to change the wedding date at the last moment, so I curtailed spending," says Dashrath Jagtap, whose daughter got married this week in a small village in the western state of Maharashtra.

    Most Indian weddings are held on days considered auspicious in the Hindu calendar. Between Nov. 8 and end-December, there are 15 such days, or nearly a quarter of the total in 2016, making the note ban particularly painful for service industries that rely on weddings.

    "There is a huge drop in the wedding demand as many people don't have the new currency," said Chirag Thakkar, a director at gold wholesaler Amrapali Group in the western city of Ahmedabad.

    "It could be more than 50 percent (on a) year-on-year basis. Most people used to purchase in cash and now they are confused whether to buy gold or spend on something else."

    A wholesale trader in Dubai said demand will continue to be weak until people feel comfortable with their cash levels. The government expects the cancelled notes to be replaced in a few months, but some experts say it could take up to a year.
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    Aussie gold miner with Chinese parent company looking to buy half of Kalgoorlie

    Barrick Gold's quest to find a buyer of the Kalgoorlie "Super Pit" has taken another intriguing turn.

    Over the past couple of days rumours have been swirling that a Chinese company with deep pockets has put in an offer for Barrick's 50% stake in the Australian gold mining operation. The bid is reportedly $540 million above any other competing offer.

    Newmont Mining owns the other half and Barrick handed over operational control of the iconic mine to Newmont in May of last year. The Super Pit is expected to be depleted of ore by 2019 but underground mining could continue after that.

    [I]f it goes through, the transaction would put an end to earlier dalliances between Barrick and Newmont, the natural buyer of the stake since it already owns half the mine.

    Two sources told Reuters that "Barrick Gold Corp. is reviewing the financial backing behind an approximately $1.3-billion (U.S.) bid for its stake in Australia’s Kalgoorlie mine by Minjar Gold, a unit of Shanghai-listed Shandong Tyan Home," according to a story carried today in The Globe and Mail.

    Unsurprisingly, considering that major miners rarely offer press comments on mergers and acquisitions in whole or in part, Barrick was mum on the potential deal. But if it goes through, the transaction would put an end to earlier dalliances between Barrick and Newmont, the natural buyer of the stake since it already owns half the mine.

    The Reuters source said Canadian, Australian and Chinese companies have also shown interest in the Kalgoorlie stake, which is Toronto-based Barrick's last gold holding in Australia. The mine is valued between US$600 million and $1 billion. Reserves top 7.5 million ounces and the mine is one of the biggest in Australia, producing about 800,000 ounces annually.

    Barrick, the world's No. 1 gold company, has set a target of paying down $2 billion in debt this year, mostly by selling mines or stakes of mines, including its majority stake in its African subsidiary Acacia Mining(LON:ACA). Barrick sold four U.S. gold mines this time last year. Newmont has shown interest in purchasing Barrick's Kalgoorlie stake, but price has been an issue and a deal has so far eluded the Denver-based company.

    Minjar Gold has been on the hunt for Australian mines all year. The company in August purchased Evolution Mining's (ASX:CAH) Pajingo minefor US$40 million – a deal that looks like small change in comparison to the offer on the table for Kalgoorlie.

    Perth-based Minjar Gold is incorporated in Australia but is owned by Shandong Tyan Home. That company is listed on the Shanghai Stock Exchange and its primary business is Chinese property development. It has a current market value of $12.1 billion.

    News of the whopping bid for Australia's Super Pit emerged around the same time that China’s Chinalco inked a preliminary deal with Peru's government to expand the Toromocho copper mine, the Asian nation’s largest overseas copper project.

    The move is part of a series of agreements signed this week that will see China pouring close to $5.3 billion into Peru’s mining and energy sector. Chinalco is expected to inject $1.3 billion into Toromocho in the coming months.

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    Base Metals

    Philippine Minister says may announce more mine suspensions next week

    Philippine Minister says may announce more mine suspensions next week

    The Philippine government will suspend more mines in a fight against environmental degradation, the minister in charge of mining said on Friday, in a move that could lift nickel prices again if supply from the world's top exporter is disrupted.

    The Southeast Asian nation has already halted 10 of its 41 mines. Twenty more were facing possible suspension and the agency in charge of the review may issue a ruling next week.

    "There will definitely be suspensions, but we have to go over the list," Environment and Natural Resources SecretaryRegina Lopez told Reuters by phone.

    Lopez said the list will be finalised "very soon, next week at the latest".

    Fourteen of the 20 mines facing suspension are nickel producers, and along with the eight of 10 already halted, they accounted for more than half of the Philippines' nickel ore output last year.

    The clampdown against what the government says is irresponsible mining began shortly after President Rodrigo Duterte assumed office on June 30. Duterte has warned miners to strictly follow tighter rules or shut down, saying the country could survive without a mining industry.

    Manila's mining crackdown drove nickel to a then one-year high of $11 030/t in August. Last month the prices briefly pierced $12 000/t for the first time since July 2015 in a broad-based rally in industrial metals.

    Nickel was trading at $11 150 on Friday, but analysts say it could top $12 000 again if the Philippines suspends more mines.

    "The Philippine ruling on those mines is really the only impetus to get it there," said Daniel Hynes, commodity strategist at ANZ.

    "Further suspensions would see an acceleration in the drawdown in inventories" of nickel from London Metal Exchange warehouses, he said.

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    Lundin shares bounce on payout, guidance

    Lundin shares bounce on payout, guidance

    Shares in Lundin Mining jumped more than 5% on Thursday after the company announced the introduction of a quarterly dividend policy and provided a strong production outlook for its copper and zinc operations. The company, worth $3.7 billion in New York, is up nearly 90% this year thanks to the rally in base metals.

    The first $0.03 per share payment, pending board approval, is expected to be made in March 2017 and represents a 1.8% annualized yield on the Toronto-based company’s current share price.

    Haywood Securities in a research note said it views the dividend, which follows Lundin's sales of a 24% interest in Congo's Tenke Fungurume copper mine $1.136 billion, as "a strong vote of confidence for Lundin’s financial (and operating) outlook."

    Lundin also announced production guidance for the next three years  with improvements in cash costs, output and capital and exploration expenditure guidance particularly at its flagship Candelaria mine in Chile:

    Attributable copper production guidance for 2017 and 2018 from mines operated by the Company has increased from last year's three-year guidance on an improved production profile at Candelaria.

    Zinc production guidance for 2017 and 2018 has been improved from last year's three-year guidance primarily on operational improvements at Neves-Corvo achieved in 2016. The zinc production profile assumes plant capacity continues at current levels and does not yet include potential additional zinc production from the Neves Corvo Zinc Expansion Project (ZEP) pending its formal approval.

    Cash costs are expected to be lower year-over-year in 2017 at Candelaria and Neves-Corvo, and unchanged at Zinkgruvan. Eagle cash costs will be higher than 2016 but remain low on the cost curve.

    Estimated costs to complete the Los Diques tailings facility at Candelaria have been further reduced by approximately $25 million. Expenditures to complete are expected to amount to $135 million in 2017 and $30 million in 2018.

    The company now expects to produce between 202,000 – 216,000 tonnes of copper on an attributable basis next year declining to 189,000 – 203,000 tonnes in 2018 and staying flat in 2019. Candeleria is responsible for three-quarters of Lundin's copper production and Lundin sees cash cost at the mine reducing to $1.20 a pound.

    Zinc output is pegged at 152,000 – 162,000 tonnes next year, while nickel production from its Eagle mine in Michigan, US is set to decline from next year's 17,000 – 20,000 to 11,000 – 14,000 tonnes during 2019.

    Copper was trading at $2.63 a pound on Thursday, a 23.5% improvement since the start of the year. Zinc is the best performing metal of 2016, up 70% since the end of last year reaching an eight year high of just over $2,900 a tonne on Monday before retreating. Nickel is up nearly 30% year-to-date to above $11,00o a tonne.
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    Blackout ramps up pressure on Alcoa Australian aluminium smelter

    A blackout that forced Alcoa Corp to shut one of two potlines at its Portland aluminium smelter in Australia will ratchet up costs further and may put the plant's future in jeopardy, analysts said on Friday.

    The smelter was hit when a power interconnector between the states of Victoria and South Australia went down on Thursday, knocking out power to both of the plant's potlines for about five-and-a-half hours.

    Speculation has grown about the future of the Portland smelter after a recent rise in electricity prices added to pressure from a years-long glut in the global aluminium market.

    "Restarting potlines is a messy, time-consuming, expensive business," said analyst Lachlan Shaw of UBS in Melbourne. "It's unquestionably another headwind to keep that operation open."

    The smelter, co-owned by Alcoa, CITIC Resources and an arm of Marubeni Corp, produces about 300,000 tonnes of aluminum a year.

    Alcoa said that one potline had been curtailed as a result of the outage, and to ensure the safety of people inside the plant.

    "Efforts are focused on maintaining production in the smelter's second potline," Alcoa said in a statement, adding that it was too early to speculate on the full impact of the power outage, or on how long it may take to restore normal operations.

    "We are not speculating at all about the future of the smelter as a result of this latest power outage," Alcoa spokesman Brian Doy told Reuters.

    The smelter moved to a power contract with utility AGL Energy last month, following the end of a power contract with the state government, raising its costs.

    Global aluminium market have only recently picked up from seven-year lows, thanks in part to a coal shortage in China that many expect to prove temporary.

    "(It's) a bad time with metal prices so high. It will take months to jack hammer all the frozen metal and carbon from out of the pots, then repair," said Managing Director Paul Adkins of consultancy AZ China.

    "So Alcoa have a difficult decision to make."
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    BHP Australia copper mine hit by another power outage

    BHP Billiton said on Thursday that its Olympic Dam copper mine was without power for four hours due to a blackout in the state of South Australia.

    That marks the second time in two months that Australia's second-biggest copper mine has been brought to a standstill over power issues.

    BHP said that operations were resuming following the restoration of power in the wake of the overnight outage that was blamed on the failure of an interconnector, a structure used to let energy flow between networks.

    "Olympic Dam's latest outage shows Australia's investability and jobs are placed in peril by the failure of policy to both reduce emissions and secure affordable, dispatchable and uninterrupted power," BHP Chief Executive Andrew Mackenzie said in a statement following the outage.

    A BHP spokeswoman declined to comment on any impact on production from the latest blackout.

    The previous blackout left the mine without power for two weeks, costing BHP an average of 567 tonnes in lost copper production a day, based on last year's output of 203,000 tonnes. That would be worth around $3 million a day at current metals prices.

    About 200,000 people were without power overnight after the state was separated from the Victorian network, according to the state's energy Minister Tom Koutsantonis.

    Some lost power for 15 minutes, others for up to an hour, But most properties had power restored by early on Thursday, he said.

    BHP in October warned that more blackouts were possible, with power shortages most likely on hot, cloudy days when there's not much wind blowing.

    Growth in wind power, which now drives more than a third of the state's electricity supply, has led to the closure of coal-fired power stations and some gas-fired capacity, which has raised blackout risks and caused price spikes.

    "The challenge to reduce emissions and grow the economy cannot fall to renewables alone," Mackenzie said.
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    Spot TCs for Chinese zinc smelters dip to $70-$90/mt in Nov as concentrate supply tightens

    Spot treatment charges for Chinese zinc smelters dipped to $70-$90/mt in November from $80-$90/mt in October, as supply of zinc concentrate tightened globally, Chinese brokerage Ruida Futures, based in Xiamen City, said in its report on the zinc sector Wednesday.

    In August and September, TCs were higher at $100-$110/mt and $90-$100/mt, respectively.

    Meanwhile, TCs for domestic zinc concentrate in November were in the Yuan 4,200-4,400/mt ($610-$639/mt) range, averaging Yuan 4,300/mt ($625/mt), down Yuan 200/mt from October, the brokerage data showed.

    TCs, the fees paid to smelters by miners, for converting zinc concentrate into refined zinc, are a main source of revenue for smelters.

    Meanwhile, Jiangxi Copper's subsidiary, Chinese brokerage Jinrui Futures, said in its zinc sector report issued late Tuesday that with the fall in TCs for domestic zinc concentrate, more market players have asked for imported ones, but that due to imported zinc concentrate being in the hands of a few stock owners, TCs for imported concentrate are getting pushed down as well.

    Jinrui said as it is now more difficult to source zinc concentrate from the domestic market, some Chinese smelters have begun to import the concentrate and more of it is expected to be imported into China in the next two months.

    China's national zinc concentrate import in the first ten months of this year was 1.54 million mt, down 43% year on year, data from the General Administration of Customs showed.

    State-run metals consultancy Beijing Antaike said at a zinc sector seminar in Chengdu City in mid-November that Chinese zinc smelters have concentrate stocks just enough for processing for half a month in November, compared with two-month processing stocks in early-2016. The agency forecast domestic zinc concentrate supply to be most tight from the fourth quarter of this year to the first quarter next year, but noted that with high-altitude mines overseas set to resume production by the second quarter of 2017, the tightness in supply of concentrate will ease by then.

    In early-November, world's major zinc producer Nyrstar cut its forecast for this year's zinc concentrate output to 90,000-110,000 mt, from the previous forecast of 130,000-160,000 mt. The Belgian producer said spot TCs have continued to dip year to date because of reduced availability of zinc concentrate.

    Another international zinc miner, Glencore, also posted a 30% year-on-year drop in its own-sourced zinc output for the first three quarters of this year, at 789,200 mt, according to the miner's third quarter report issued early-November.

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    Sherritt cuts production forecast for Moa nickel JV after bridge collapse

    Sherritt International Corp cut its full-year production forecast for its joint nickel venture in Cuba following the collapse of a municipal bridge there last week that killed four workers.

    The Canadian miner lowered its finished nickel production forecast for the Moa operation to 32,500-33,000 tonnes, from 33,500-34,500 tonnes.

    However, Sherritt said that its finished cobalt production forecast remained unchanged as higher volumes of third-party feed offset the impact of reduced production.

    Sherritt owns 50 percent of the Moa operation with General Nickel Company SA of Cuba.

    Last week, Sherritt said the workers had died when the bridge they were repairing collapsed. The bridge had been damaged by Hurricane Matthew in October and workers have been repairing the structure since late last month.

    The bridge crosses a shallow river and is the main access from the local town and port of Moa to the mine site and an acid leach plant.

    Sherritt said on Tuesday that a temporary bypass over the river is in place.

    Plant operations have resumed, although transport is affected by longer travel times and the need to carry lighter loads, Sherritt said.

    The Toronto-based company said that the timing of more permanent repairs to the damaged bridge or a replacement of the bridge is still unknown.

    Shares of Sherritt were down 9.3 percent at C$1.17 in late afternoon trading.
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    Hedge funds have never been this bullish about copper price

    After hitting an 18-month high on an intraday basis on Monday, the copper price has come under pressure as the bullishness about the impact of Trump's $500 billion infrastructure plans on demand for the bellwether metal begins to cool.

    In Asian trade on Wednesday copper for delivery in March, the most active contract, exchanged hands for $2.5570 per pound ($5,637 a tonne) on the Comex market in New York. Copper is now down 7% from this week's peak.

    After vastly underperforming other metals and steelmaking raw materials in 2016, copper is still looking much healthier than pre-Trump with a 20% rise year-to-date.

    The change in sentiment is striking considering the radical shift in the positioning of large-scale derivatives speculators such as hedge funds.

    While continuing to reduce bullish silver, platinum and gold bets, on the copper market hedge funds have added to long positions – bets on higher prices in future – for three weeks in a row.

    According to the CFTC's weekly Commitment of Traders data up to November 22 (released yesterday due to the US long weekend) so-called managed money investors have taken the net long to an all-time high of 76,346 lots or the equivalent of just over 1.9 billion pounds.

    Saxo Bank points out that this is a whopping 55% above the previous record from July 2014:
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    Iluka takeover of Sierra Rutile hits speed bump over tailings dam concern

    Iluka Resources Ltd said on Tuesday it was delaying a planned 215 million-pound ($267 million) takeover of Sierra Rutile Ltd and could possibly call the deal off after raising concerns about mine tailings dams.

    Iluka said it had notified Sierra Rutile that a "material adverse change condition" of their merger agreement had been triggered "due to geotechnical risks of SRL's tailings dams" and was in talks to extend the Wednesday deadline for the deal.

    "For an abundance of caution we've exercised this condition," Iluka spokesman Robert Porter said.

    The concern comes a year after a tailings dam at an iron ore mine owned by BHP Billiton and Vale burst in Brazil, triggering a massive mud flow that wiped out a town and killed 19 people in that country's worst environmental disaster.

    Iluka had planned to complete the deal on Tuesday after receiving clearance from Germany's anti-trust watchdog last week.

    However staff who were sent to Sierra Rutile's operations in Sierra Leone last week found that following the wet season, there was a leak in a dam which had not been apparent when they had inspected the facilities during the dry season.

    Iluka now wants a few extra days to examine the tailings dams more closely.

    "We will be bringing more people in before the end of the week to enable us to assess if the risk is high, low, or insignificant and can be remediated," Porter said.

    If the companies fail to agree to extend the deal deadline within five business days after Wednesday, then either side may terminate the merger agreement, Iluka said in a statement to the Australian stock exchange.

    Iluka wants to take over Sierra Rutile as it owns one of the world's largest deposits of rutile, which is used to make white pigment and titanium metal.

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    Indonesian miner Antam's nickel smelter plans hinge on easing of ore export ban: CEO

    Indonesian state-controlled miner PT Aneka Tambang Tbk (Antam) may not have the cash flow for downstream investments worth at least $500 million if a ban on nickel ore exports is not eased, its chief executive told Reuters on Monday.

    Indonesia banned metal ore exports in 2014 to encourage miners to build domestic smelters to shift exports from raw materials to higher-value finished metals and create jobs.

    Antam hopes the government will allow some exports of nickel ores, although other companies say any resumption of shipments could undermine metal prices and hurt investments that have already been sunk into processing plants.

    Antam has received 3.5 trillion rupiah ($258.9 million) in government funding to develop a smelter in Indonesia's North Maluku province, but Antam CEO Tedy Badrujaman said the company wants to add two more lines and build a stainless steel factory.

    "There is still a lot that we need to develop," Badrujaman said in an interview. "What can bring cash to Antam is exporting nickel ores. Overseas, the prices are quite good and Antam's cash flow can be revived."

    Antam swung to a net profit of 38.3 billion rupiah ($2.84 million) for the nine months ended Sept. 30, from a loss of 1.04 trillion rupiah a year ago, mainly due to a rise in gold prices.

    But nickel remains a key revenue contributor for Antam, and some analysts, including Moody's Investors Service, had downgraded Antam's rating after the 2014 ban due to concerns about the risk of weakened earnings and cash flow.

    Several government officials said last month that Indonesia was considering allowing annual shipments of up to 15 million tonnes of nickel ore.

    But a minister told Reuters on Monday the ban is likely to stay in place as it helps to generate value for Indonesia in terms of taxes and employment.

    "I think we don't need to export any more," Luhut Pandjaitan, the coordinating minister for maritime affairs who also has oversight on Indonesia's mining policy, said, adding that the ban was not just intended for any single company.

    Antam's Badrujaman, however, welcomed a government official's announcement last week that Indonesia planned to cut the royalty charged on sales of processed and refined nickel to 2 percent from 4 percent.

    The move could lead to annual cost savings of up to 60 billion rupiah ($4.4 million) for Antam, he said, assuming that the company sells 20,000 tonnes of processed nickel.

    Antam, 65 percent-owned by the Indonesian government, mines commodities including nickel, gold and bauxite. Its main rivals are PT Vale Indonesia Tbk and a joint venture between Indonesia's Bintangdelapan Group and China's Tsingshan Group.
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    Delving into China's weird Copper numbers.

    Image title
    Copper demand in China has outpaced concrete demand since 2011.Image titleCredit Suisse and Brook Hunt say this is power related demand. 

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    Codelco narrows Q3 profit as copper prices fall

    Chile State-owned miner Corporación Nacional del Cobre de Chile (Codelco) has narrowed its third-quarter profit to $79-million for the three months ended September, as a 17% drop in copperprices and higher costs weighed on the bottom line.

    This compared with a profit of $342-million in the comparable period a year earlier.

    For the nine months to September, Codelco reported a net loss of $18-million, compared with a profit of $1.22-billion in the same nine-month period of 2015.

    Despite falling grades, the company reported record output to 1.27-million tonnes of copper in the nine-month period, compared with 1.25-million tonnes a year earlier. Including its participation stakes in the El Abra mine and the Anglo American Sur complex, Codelco produced 1.37-million tonnes of copper, which was slightly less than1.38-million tonnes produced in the same period of 2015.

    Codelco posted improved production figures despite a 6.2% fall in average grades, which the company countered by increasing throughput rates.

    The company achieved a direct cost reduction of 8% for the nine-month period, lowering C1 costs to $1.27/lb. This was the lowest figure in five years, CEO Nelson Parro stated.

    He pointed out that third-quarter results had missed out on the recent copper price rally, adding that there was uncertainty as to how long the rally would last. According to Codelco, the average price of copper in the third quarter fell 17% year-on-year to $2.14.30/lb.

    Codelco contributed $733-million to the State in the year-to-date period, comprising $707-million in profit under the State copper law and contributing $26-million in State royalties.
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    Protest halts Anglo American's Los Bronces copper mine for second time

    Anglo American has halted production at its Los Bronces copper mine in central Chile after masked protesters seized parts of the installations, the second time in a month this has happened.

    "The Los Bronces mine will remain completely halted until the minimum necessary guarantees exist that it can operate safety and without risk to personnel," the company said in a statement Sunday.

    The mine is one of the world's largest copper operations, producing 401,700 mt of the metal in concentrate and cathode last year.

    According to Anglo American, the protesters "violently and illegally" entered the mine site early Saturday morning, just hours after unions representing staff of contractor firms employed at the high altitude operation accepted a proposal from their employers.

    The shutdown of the mine comes just 10 days after a similar protest which closed the mine for approximately around a day.

    The company called on the protesters to "suspend this illegal occupation and maintain a dialog through the established channels to achieve a peaceful resolution to this dispute."

    Anglo American said Sunday that police have now entered the mine in order to allow workers not involved in the protest but unable to leave because of it can return home and to provide supplies key to maintaining mine processes and mitigating its environment impact.

    Anglo American owns 50.1% of the mine, after selling the balance of shares to Chile's state copper company Codelco and Mitsui and Mitsubishi of Japan in 2012.

    Last September, unionized employees at Los Bronces went on strike for five days after pay talks ended without agreement.
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    Aluminum producers seek first-quarter premium of $95-$110/T from Japanese buyers: sources

    Some big aluminum producers seek a premium of $95-$110 per ton from Japanese buyers for primary metal shipments in the January to March period, up 27-47 percent from the previous quarter, five sources involved in pricing talks said on Friday.

    Japan is Asia's biggest importer of the metal and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.

    Any increase in the quarterly premiums would mark the first rise in three quarters, and reflect tightening supply, although buyers said the initial offers were too high, the sources said.

    For the October-December quarter, Japanese aluminum buyers agreed to pay a premium of $75 a ton for the metal, down 17 percent to 19 percent from the prior quarter, on softer spot premiums amid a supply glut.

    Rio Tinto Ltd has offered Japanese buyers a premium of $95 per ton following a drop in local inventories and higher demand for imported aluminum in China, while Rusal has sought a premium of $110 per ton to reflect higher U.S. premiums, the sources said.

    Aluminum stocks at three major Japanese ports fell 2.9 percent in October from the previous month to 278,200 tonnes, trading house Marubeni Corp said on Monday.

    Buyers are not ready to accept the offers, the sources said.

    "The $110 proposal is way too high and the $95 offer is still above the levels that we think are appropriate," said a source at a trading house who declined to be named.

    "We will need to accept a hike from the current quarter amid tighter supply in Asia, but only if premiums come in the low $80 a ton," a source at a fabricator said.

    The quarterly pricing negotiations are held between Japanese buyers and global miners including Rio, Alcoa Inc and South32 Ltd.

    Rusal has not been involved in the quarterly pricing talks over the past couple of years, but the Russian company sent an email to its customers in Japan this week in an apparent bid to have an influence in the negotiations, the sources said.

    Some talks started this week and are expected to continue until next month.

    Rio and Rusal declined to comment.

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    Zambia copper concentrate duty to disrupt global copper supplies – sources

    A plan by Zambia to put a duty on copper concentrates imports could put a kink in the global supply chain for the metal, industry sources said, by forcing neighbouring Democratic Republic of Congo (DRC) to send surplus mine output elsewhere.

    The 7.5% duty announced earlier this month and due to come into force at the start of 2017, is likely to disrupt supply of refined metal in the early part of the year, just as the global market moves away from surplus, helping to support prices.

    Zambia, Africa's second-largest copper producer, will produce about 425 000 t of copper metal this year, according to consultancy GFMS, accounting for about 2% of global output.

    The country's smelters, including those run by privately held Eurasian Resources Group (ERG) and India's Vedanta Resources, currently source some 500 000 t of concentrate from the DRC, according to consultants Wood Mackenzie.

    This is made up of 400 000 t from ERG's Frontier mine and around 100 000 t from La Sino-Congolaise Des Mines(Sicomines), a joint venture between DRC's Gecamines, China Railway Construction Corp. and Sinohydro Corp.

    "It will not be viable for smelters to buy concentrates from the DRC," said an industry source working in Zambia. "This change will upset the supply chain for the first six months of 2017."

    Miners in the DRC would be forced to look for other ways to process their concentrate, such as sending it some 3 000 km (1 860 miles) overland to Durban in South Africa for shipping to China, a two-month trip, three industry sources said.

    This would take the supplies out of circulation for several months and delay production of up to 150 000 t of coppermetal.


    Smelters in Zambia, where capacity far outstrips current mine supply, are already struggling with low feed stocks after miners including Glencore closed copper shafts as prices fell to six-year lows.

    The duty could mean they have even less concentrate to process, at least in the short term, raising costs per unit.

    "People are well aware that Zambian smelters are under considerable stress to which this will add significantly," said a source familiar with the matter.

    The sources said the most affected smelters would be ERG's Chambishi Smelter and Vedanta's Konkola Copper Mine which source a significant part of their concentrate needs from DRC.

    Officials at ERG did not reply to an emailed request for comment. Konkola declined to comment.

    The new duty was likely aimed at boosting Zambian refined metal production from local concentrate supplies, but the move could backfire and instead benefit smelters in other countries such as China and India, Wood Mackenzie said.

    Companies with local mines including First Quantum Minerals and Barrick Gold could increase output, traders said. Officials from both companies did not respond to requests for comment.

    The Zambian government was also coming under sustained lobbying from smelters to reverse its proposal, industry sources said.

    "Some are already threatening to close down," said a Swiss trader active in the region. "I believe that the duty is not a definitive decision".

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    Steel, Iron Ore and Coal

    China pushes for long-term coal contracts to stabilize market

    Chinese authorities have detailed measures to ensure the execution of medium- and long-term contracts between coal producers and buyers as the government seeks to avoid violent price fluctuations, Xinhua reported.

    A guideline released by the country's top economic planner and other parties specified that the contracts should make clear the amount of coal supply and price range, with clauses to allow for market-oriented price adjustments.

    Illegal practices such as price manipulation and spreading misleading information will be punished, while those who honor the contracts will receive government policy support, according to the guideline.

    The push for medium- and long-term contracts came as a supply crunch in the industry, which is partly due to a government capacity-cutting campaign, has driven an unexpected surge in coal prices.

    During the past two months, several top-level meetings have been called by the National Development and Reform Commission (NDRC) to seek increased supply to stabilize the market.

    Authorities have pledged to ensure market supply without weakening capacity-cutting efforts with plans to relax the limit on production days for coal producers.

    Major coal miners such as Shenhua Group and China National Coal Group last month inked long-term contracts with thermal power conglomerates, with price anchored at 535 yuan/t FOB with VAT for 5,500 Kcal/kg NAR coal.

    Thanks to these efforts, prices are showing signs of cooling. At the National Coal Trade Fair on December 1, NDRC deputy head Lian Weiliang said prices will gradually return to "reasonable" levels as China has an "absolute guarantee" over supply.
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    South African Oct thermal coal exports down 13pct on yr

    South Africa exported 6.14 million tonnes of thermal coal in October, down 12.8% on the year and 10.7% on the month, showed customs data released on November 30.

    The decline was mainly due to its lower shipments to India, Europe and Turkey, according to data.

    South African thermal coal exports over January-October totaled 58.51 million tonnes, down 4.9% from the year-ago level.

    India remained the largest taker of South African thermal coal, importing 3.13 million tonnes, falling 6% on the year and down 5% from September.

    Shipments to Northwest Europe and the Mediterranean fell for the second straight month to a four-month low of 486,183 tonnes, with the Netherlands taking 166,783 tonnes -- the lowest since June -- and Italy taking 319,400 tonnes.

    Exports to South Korea were close behind at 428,510 tonnes, the highest since 2014. Nothing was shipped to Turkey for the first time since May.
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    Chinese steel giant established following key merger

    China Baowu Steel Group, whose annual output will be China's largest and the world's second largest, was established on December 1 in Shanghai following the merger of two major steelmakers, local media reported.

    The group was created by the merger of Shanghai-based Baosteel Group and Wuhan Iron and Steel Corporation in central China's Hubei Province.

    The combined steel output of the two groups totals about 60 million tonnes, exceeding that of Hesteel, China's current top producer, and putting it at second place worldwide, after ArcelorMittal, according to the 2015 data from the World Steel Association.

    The new group is estimated to have 228,000 employees, general assets worth 730 billion yuan ($106 billion) and an annual revenue of 330 billion yuan.

    The merger is an important move to promote China's economic restructuring and improve the competitiveness of Chinese steelmakers in the international market, said Ma Guoqiang, chairman of Baowu.

    The State-owned Assets Supervision and Administration Commission approved the merger in September as the country fights to cut steel overcapacity.

    China has shut down steel plants with total capacity of over 90 Mtpa in the past five years and planned to reduce output by an additional 100-150 million tonnes by 2020.
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    China Nov steel sector PMI rises to 51.0

    The Purchasing Managers Index (PMI) for China's steel industry rose to 51.0 in November, compared with 50.7 in the previous month, showed data from the China Federation of Logistics and Purchasing (CFLP) on December 1.

    That was a new high since May of the year, indicating resilience in the steel industry. The steel market has been supported by declining operating rate at steel mills, good sales and relatively low stocks.

    In November, the steel industry output sub-index was 48.8, dropping 1.9 from 50.7 in October, after four months' consecutive reading above the 50-point mark that separates growth from contraction.

    Operating rate at domestic steel mills fell recently affected by climbing cost, constrained supply of steelmaking materials, as well as strengthened environmental regulations.

    As of November 25, the operating rate at 163 surveyed steel mills stood at 76.52%, falling 0.28% on week; and the profit margin slid 6.13% from the previous week to 47.24%.

    Experts anticipated the downturn of crude steel output to continue in December during traditional maintenance season.

    Meanwhile, the new orders sub-index reached 55.9, compared with 54.6 in the previous month, also the highest since May this year.

    Separately, the inventory index for the country's steel industry dropped 3.3 from October for the second straight month to a seven-month low of 45.1 in November.

    As of November 10, steel products stocks at China's key steel mills stood at 12.91 million tonnes, falling 6.92% from ten days ago and 14.07% from the year-ago level.

    Besides, the purchase price index continued to increase from 68.3 in October to 77.4 in November, the highest level in recent seven months and a new record high since February 2011, indicating higher prices of steel-making materials.
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    SAIL to double iron-ore production of its Bolani mines

    Steel Authority of India Limited (SAIL), the country’s largest integrated steel producer, will double the production capacity of its Bolani iron-ore mine at eastern Indian province of Odisha.

    The capacity of the mine will be ramped up to 10-million tons a year over the next four years from its current capacity of five-million tons a year, entailing an investment of about $34-million.

    The expansion of Bolani is crucial to maintain future raw material security. The mine is an important source of supply to SAIL’s steel mills at Rourkela, Durgapur and Bokaro, a company official in the raw materials division has said.

    Besides Bolani, SAIL has also started an expansion of its Barua and Kalita mines to double their production to four-million tons a year each, from two-million tons a year.

    Elaborating on the importance of enhancing raw material security, the official said that SAIL, which has five integrated steel mills under its fold, would achieve hot metal productionof about 23.1-million tons in the current financial year. This would increase to 50-million tons a year by 2025, which would require matching increases in production from its captive raw material assets.

    Meanwhile, the company is expected to select, over the next few weeks, a mine developer and operator (MDO) for its 15-million-ton-a-year iron-ore mine at Rowghat in the central Indian province of Chhattisgarh.

    SAIL has invited offers from domestic and international MDOs for the development of the Rowghat mine, which has an estimated reserve of more than 500-million tons of iron-ore. The company will offer an MDO a five-year period for construction and development of the reserves and a production agreement for the subsequent 25 years.

    SAIL has been seeking an MDO since early 2015 and previous MDOs, which had submitted offers, withdrew at the prebid conference stage, owing to concerns about law and order at the location.

    The development of the Rowghat mine is critical for supply for the Bhilai steel plant. However, the area where the iron-ore reserves are located in is plagued by violence and disruptions by ultra left extremists in the largely forested region, leading to previous MDOs balking at taking up the project.

    After series of consultations with provincial government and the federal Ministry of Home, the central government has deployed large contingents of paramilitary forces specialised in combating extremists. This should bolster confidence among MDOs to go ahead with the project.
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    Beijing to bid farewell to coal mining in four years

    China's capital Beijing will close its last three coal mines in the next four years and entirely quit coal mining by 2020, Xinhua reported, citing sources with the Beijing Municipal Commission of Development and Reform as said on November 30.

    In 2016, Beijing closed two coal mines with a total annual production capacity of 1.8 million tonnes per annum, said Li Bin, deputy director of the coal management office at the commission.

    By 2020, Beijing will completely bid farewell to the coal mining industry, Li said.

    Statistics show that Beijing's coal consumption in 2010 was over 26 million tonnes, with the number declining to about 12 million tonnes in 2015.

    The central and the Beijing municipal governments allocated more than 160 million yuan ($23.2 million) in subsidies to local coal workers and miners in 2016, said Geng Yangmou, chairman of Beijing Haohua Energy Resource.

    Geng said the coal mining areas will be developed, as new industries are expected to be brought in.

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    Goa iron-ore mines slow to resume production

    Optimism over getting more than 40 iron-ore mines in the western Indian province of Goa to resume operations is fast receding, owing to procedural delays.

    Despite a government announcement two months ago that 40 iron-ore mines will resume operations as monsoon rains were over, mines are slow in getting back into production.

    At least two Goa-based mine owners have said that the number of mines resuming operations will be short of government’s expectations as little is being done to relax restrictive policies

    Miners have voiced disappointment that Goa has not relaxed a ban on dumping rejects outside lease hold areas. They believe the ban should be lifted as depressed demand for iron-ore fines in China is forcing miners to carry higher stocks and rejects. Alternatively, miners say they will have to cut back production as handling rejects will be a formidable challenge.

    Goa miners are also hesitant to resume operations as there is no clarity on the process of distribution of production among various mines from the cap of 20-million tons a year set by India’s Supreme Court.

    Miners say that some owners are ready to resume production, but that they have not received their production quota from the 20-million-ton-a-year allocation, while others have been allocated a quota, but have not yet resumed production.

    The Goa government is reportedly considering redistributing already allocated production quotas to get more mines into production. Under the new re-distribution policy currently in the works, the government will probe why mines that have been allocated a quota have not resumed production. If replies are not found to be acceptable, the government plans to withdraw the quota limits from nonoperational mines and pass them on to operational mines to enable a faster production ramp-up.

    On Monday, the Goa government allocated iron-oreproduction quotas to four more mines, enabling them to resume production. A government official said that production limits set for these four mines were allotted proportionately and after factoring in the 20-million-ton-a-year cap.

    Salgaonkar Mining Industries was allocated a quota of 0.046-million tons, Salitho Ores a quota of 0.277- million tons, Sova Iron Ore 0.346-million tons and Marzook and Cadar 0.115- million tons.

    A total of 16-million tons have now been allocated, leaving another 4-million tons left for yet to be operationalised mines in the province, the official added.
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    China's key steel mills daily output up 1.2pct in early Nov

    Daily crude steel output of China's key steel mills rose 1.22% from ten days ago to 1.72 million tonnes over November 1-10, according to data released by the China Iron and Steel Association (CISA).

    The rise was mainly due to resumption of production at steel mills, stimulated by enlarging profit margin.

    The country's total crude steel output was estimated at 2.27 million tonnes each day on average during the same period, edging up 1.04% from ten days ago but falling 0.87% from the month-ago level, the CISA said.

    During November 1-10, daily output of pig iron at key steel mills stood at 676,600 tonnes, rising 1.56% from previous ten days; and that of steel products dropped 4.31% from ten days ago to 1.62 million tonnes.

    By November 10, stocks of steel products at key steel mills increased 3.52% from ten days ago to 12.91 million tonnes, the CISA data showed.

    As of November 25, total stocks of major steel products in China stood at 7.86 million tonnes, up 0.9% on week, the first rise in nearly six weeks, and the operating rate of furnaces slipped for the fifth consecutive weeks to 76.5%.

    Domestic demand for steel in traditionally slack season was stable recently, boosted by production halts and cuts, as well as climbing furnace maintenances.
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    Large coal bases to take 95pct of China's total coal capacity

    China planned to expand production capacity of large coal production bases to over 95% of the nation's total by 2020, one senior official with the Ministry of Land and Resources (MLR) said on November 29.

    The official didn't give figures for present capacity of these large coal bases nor their share of the national total.  

    China has said previously it aimed to make 14 large coal production bases to account for 95% of the nation's total production capacity over the 13th Five-Year Plan period (2016-2020).

    The 14 large coal bases, mostly located in coal-rich north and northwestern regions, produced 3.36 billion tonnes of coal in 2013, said Wu Xinxiong, director of the National Energy Administration, in early 2014.  

    China also planned to reduce the number of operating coal mines to 6,000 or so by 2020, from just above 10,000 mines early this year, with advanced mines contributing 40% of the total capacity.

    The government aimed to build 103 national-level energy resource bases in the next five years, supported by 267 state-planned mining areas, according to a five-year plan on development of mineral resources released by the MLR on the same day.
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    CITIC aims to cut costs at Sino Iron project, ramp up output

    CITIC Pacific Mining's Sino Iron project in Western Australia is ramping up production and expects to export more than 10-million tonnes this year, its chairman said on Tuesday, adding the goal was to become the world's lowest cost producer.

    Chairman Zhang Jijing of CITIC Pacific Mining, a wholly-owned subsidiary of Hong Kong-listed CITIC, said production needed to be increased as quickly as possible to achieve economies of scale.

    "Our objective is to become the lowest cost, large scale magnetite (iron ore) producer in the world," he said at a mining conference in London.

    Analysts have labelled it one of the world's costliest mines and a commercial disaster by industry standards as it wrestled with budget over-runs and delays.

    But for China, the Sino Iron project, is central to Beijing's strategy, as its domestic industry dries up, to ease its dependence on the world's dominant low cost iron oreproducers, such as BHP Billiton and Rio Tinto.

    CITIC Pacific shipped its first ore to one of its Chinese steelmills at the end of 2013.

    Zhang said all six production lines have been commissioned, with the last one starting six months ago and the mine is ramping up production to export 10-million tonnes this year.

    At full capacity, it would produce 24-million tonnes of iron-ore a year, compared with the 1.5-billion-tonne world market.
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    Vale to sell 13 million mt Moatize coal in 2017, boost index sales

    Brazil's Vale said Tuesday it expects to sell 13 million mt and produce 17 million mt of coal at Moatize, Mozambique, over 2017, up from 6 million mt produced in 2016.

    No coal sales are earmarked for China, with 11 million mt sold via Nacala and the reminder using the Beira rail and port corridor, according to a company presentation delivered in New York.

    Coal sales will be split 65% as met coal, 35% as thermal.

    The company has 2017 coal sales evenly split into three regions, with 34% to northeast Asia of Japan, South Korea and Taiwan, a third to the Atlantic excluding South America, and the remaining third going to surrounding mainly Southern Hemisphere countries such as India, those in Africa and Brazil.

    Pricing for met coal in 2017 is expected to be dominated by index-linked at 66%, with a reduction in exposure to the benchmark for pricing after 70% was priced off the benchmark in the first nine months of 2016.

    "Index-based sales [will] increase to manage pricing volatility," Vale said, explaining the move in pricing.
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    Inner Mongolia Ordos starts safety inspection on coal mines

    The local government of coal-rich Ordos in the northern autonomous region of Inner Mongolia announced a city-wide safety inspection on all of its coal mines, after a roof caving accident killed three miners at Wantugou mine on November 25.

    The coal mine is owned by Inner Mongolia Boyuan Coal Chemical Industry Co., Ltd. and has an annual production capacity of 3 million tonnes.

    It still needs time to see whether and to what extent the safety inspection would impact local coal supply.

    Raw coal output in Ordos accounts for over 60% of the total output in the autonomous region, which stood at 609.67 million tonnes in the first three quarters this year, down 10.7% from a year ago, according to the National Bureau of Statistics.

    The city government aims to keep coal output steady at around 600 million tonnes and complete sales of 550 million tonnes in 2016.

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    Yancoal in talks over Rio's $1 bln coal mine portfolio

    China's Yancoal is believed to have entered exclusive negotiations to buy Rio Tinto's $1 billion-plus coal portfolio, The Australian reported on November 29, citing market sources.

    The situation sees global trader Glencore take a back seat in the contest, which involved a handful of parties but more recently has been perceived as a two-horse race between Yancoal. It is unclear whether the talks are officially exclusive.

    On offer are the company's NSW thermal coal mines, which constitute its Coal & Allied business, although sources have said that other coking coal mines could be incorporated in the sale.

    The listed suitor has recently booked losses, but Yancoal has plenty of acquisition fire-power, as it is 78%-owned by Yanzhou Coal, which is backed by the Chinese Government, and 13%t by the Noble Group.

    The investment bank Deutsche is selling the assets on behalf of Rio, which has declined to comment on the status of the negotiations.

    Sources now believe that Anglo American may opt to hold its $1 billion-odd Moranbah and Grosvenor, after the period of exclusivity with Apollo private equity lapsed without a deal, following a sales process run by Bank of America Merrill Lynch.

    However, suitors are expecting flyer documents for Anglo American's Capcoal complex — said to be worth several hundred million dollars — by Christmas.

    It will be interesting to see what the bankrupt Peabody Energy ultimately does with its Millennium coking coal mine in Queensland that is understood to be planning to sell.

    South32, advised by JPMorgan, purchased the other mine up for sale in recent weeks — the Metropolitan coal mine in NSW.

    Rio is considering a sale at a time that thermal coal remains a less favorable form of power supply due to environmental concerns, as it tries to keep its debt levels in check.

    Already, Yancoal manages the Cameby Downs and Premier coal mines in Queensland and Western Australia respectively on behalf of Yanzhou Coal, and the Ashton, Austar and Donaldson mines in NSW on behalf of Watagan Mining Company.
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    High ferrochrome prices could speed sector consolidation

    Rocketing ferrochrome prices are expected to accelerate consolidation among producers in South Africa, increasing the global stainless steel industry's reliance on mining group Glencore and chrome ore company Samancor.

    Nearly 60 percent of the world's production of global chrome ore -- used to make stainless steel raw material ferrochrome -- comes from South Africa, where Glencore and Samancor are casting an acquisitive eye over smaller rival Hernic Ferrochrome.

    Four Sources in the stainless steel and ferrochrome industries told Reuters that Glencore is looking to reinforce its dominant position with the purchase of Hernic, which is majority owned by Japan's Mitsubishi Corp.

    Swiss-based Glencore expects to produce 1.57 million tonnes of ferrochrome this year but has capacity for nearly two million tonnes. Hernic would give it a further 420,000 tonnes.

    "Hernic would be a good fit for Glencore ... and (Glencore) won't want to see new players in South Africa's chrome industry," said Mark Beveridge, of commodities consultancy CRU.

    "Glencore has invested a lot of money in South Africa and is a driving force behind consolidation. It's not good news for stainless steel producers."

    Glencore declined to comment.

    The industry sources said that Mitsubishu is considering a sale, given that current ferrochrome prices are likely to push up Hernic's value. The sources gave no valuation estimates for the company, which describes itself as the world's fourth-largest integrated ferrochrome producer.

    Macquarie analysts estimate global ferrochrome output at 10.7 million tonnes this year against demand above 11 million tonnes, which has helped to lift prices by more than 70 percent since September to about $1.10 per lb.

    A Mitsubishi Corp spokesman in Tokyo, when asked whether the Japanese trading house is looking to sell its 50.1 percent stake, would only say that "Mitsubishi Corp is considering all possible ways to support sustainable operations of Hernic Ferrochrome".


    Two of the sources said that South Africa's Samancor is also interested but that Glencore is in a stronger position to fund acquisitions than at the start of 2016, with group revenues rising on the back of the recent rally in commodities prices.

    A Samancor representative was not immediately available for comment.

    Samancor is Glencore's biggest rival in ferrochrome, with CRU's Beveridge putting its capacity at 1.4 million tonnes a year, rising to 2 million tonnes including joint ventures.

    "Glencore isn't going to let someone else move on Hernic," one chrome industry source said, though he added that the company may want to wait to see where prices settle and that China's role in the market will be important.

    Ferrochrome importer China also has the ability to produce its own supplies, having built large amounts of capacity over the past 10 year, with the potential to stabilise prices.

    China's chrome ore stocks are running low, but restocking may not be difficult, sources say, because smaller producers in South Africa, India and Turkey have restarted or likely to restart mothballed capacity.

    "If the Chinese can get the ore, they can make money by producing ferrochrome," CRU's Beveridge said.

    Recent data from the International Stainless Steel Forum showed Chinese output at 11.73 million tonnes between January and June, up 7.9 percent from the first six months of last year.

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    Rio seeks iron-ore premium from China mills in likely pricing war revival - sources

    Australian miner Rio Tinto is asking Chinese steel mills to pay a premium for its highest grade iron ore product for the first time since an annual pricing system collapsed in 2010, two sources familiar with the situation said.

    The demand by the world's No. 2 iron-ore miner comes as Chinese steel producers recover from years of losses, buoying demand for the steelmaking raw material, but could revive tensions between miners and mills over pricing that they seemed to have ditched six years ago.

    Rio is seeking up to $1 per tonne more than the index price for its Pilbara iron-ore product, or PB fines, from Chinese mills on long-term contracts for 2017, the sources said, in a break from a years-long trend of pricing at spot values. Previously, Rio was selling the ore at a premium only to traders.

    The miner has also pushed up the premium it seeks from traders to between $2 and $2.50 per tonne over the index price for the same product for January to April, they said.

    That would be a record high and up from a premium of $1.50 for the four-month period through December this year, said one of the sources who works closely with Rio in China.

    From Chinese mills, Rio initially sought a 15-cent premium, but this week increased it to about $1, said the same source.

    "The steel market is so hot this year and they think it's something that buyers can accept," the source said. "If Rio gets it, other miners may follow."

    Rio Tinto declined to comment.

    A reduction in China's steel capacity along with a push to spend more on infrastructure has fuelled an 81 percent spike in Chinese steel prices this year, sparking a similar rally in iron ore prices.


    After four decades of fixing iron-ore contract prices annually, the miners and mills in 2010 began setting them more frequently and in shorter periods against spot index prices such as those published by Platts and Metal Bulletin.

    "This is illogical," said the second source on Rio's planned premium for mills. "The index already reflects the spot market, why add a premium?"

    The spot index breached $80 a tonne on Monday for the first time since October 2014, gaining 86 percent this year after a three-year slide.

    The China Iron and Steel Association (CISA), which groups the biggest steel producers in the world's top market, called the planned price markup "unfair" in a report by Xinhua News on November 18 which did not identify the leading iron ore producer.

    Li Xinchuang, vice-secretary general of CISA, said "currently it's not easy to demand" a premium for iron orefrom Chinese mills.

    "The steel market is still very weak, not only in China but globally," Li told Reuters by phone.

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    Gansu halts outbound coal supplies to ensure adequate supply

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    Mechel reports third-quarter loss, misses out on coal price surge

    Metals and mining group Mechel on Tuesday reported a third-quarter net loss of 2.8 billion roubles ($43 million) as a surge in the price of its main product coking coal came too late to bolster its earnings.

    Prices for coking coal - a key component in steel production, - have more than doubled since July on expectations of lower supply, sending Mechel's shares to three-year highs.

    But Mechel, Russia's second-biggest coal producer after market leader Evraz, said even though spot coking coal prices were currently at more than $300 per a tonne this had not supported its financial earnings in the third quarter.

    "The rapid growth of coal prices, which began in mid-summer, didn't have time to make a full impact on the third quarter's financial results," Mechel Mining Management Chief Executive Officer Pavel Shtark said.

    "We saw this hike's reflection in our contracts only by the very end of this reporting period," he said. "The current favourable market situation will definitely be reflected in the results of the fourth quarter and future periods."

    Mechel, which was hit by a collapse in global steel prices, has been in lengthy talks with creditors to restructure its debts and is yet to sign final debt restructuring deals with all the creditors.

    Mechel said its coking coal sales fell 10 percent in the third quarter to 2 million tonnes, but it had increased sales to China, Japan and India in the period.

    Steel and coal production both fell 5 percent quarter-on-quarter to 1 million and 5.6 million tonnes respectively, the company said.

    Mechel's third-quarter core earnings totalled 15.9 billion roubles, up slightly from 15.7 billion roubles in the previous quarter. Revenue slipped from 68 billion roubles to 66.2 billion. The company made a net profit of 8 billion roubles in the second quarter of this year.
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    Weekly US coal production estimate again hits 2016 high: EIA

    Weekly US coal production totaled an estimated 17.23 million st in the week ended November 19, the highest total so far this year, US Energy Information Administration data showed Monday.

    Coal production has largely increased since bottoming in early April, with estimates in the last four weeks counting among the highest reported year to date. Sources attribute the increase to stockpile building, as utilities look to accelerate deliveries to meet minimum commitments for the year.

    The weekly estimate -- which was issued Monday due to last week's Thanksgiving holiday -- was up 2.8% from the prior week, and up 6.5% from the year-ago week, the fourth straight week the estimate has lapped the year-ago comparison.

    The weekly estimate also showed coal production in Central Appalachia, Northern Appalachia and the Illinois Basin totaled year-to-date highs.

    For the year, US coal production totaled an estimated 657.48 million st, down 18.8% through the same period last year. On an annualized basis, US coal production in 2016 would total 727.2 million st, down 18.8% from last year.

    For the week, coal production in Wyoming and Montana, which is mostly made up of production from the Powder River Basin, totaled an estimated 7.7 million st, up 0.7% from the prior week but down 2.4% from the year-ago week.

    Year-to-date coal production in the region totaled an estimated 289.1 million st, down 22.9% from last year, and would total 320.5 million st on an annualized basis, down 23.2% from last year.

    In Central Appalachia, weekly coal production totaled an estimated 1.7 million st, up 7.9% from the prior week and up 4.8% from the year-ago week.

    Year-to-date production in the basin totaled an estimated 70 million st, down 26.7% from last year, and would total 77.4 million st on an annualized basis, down 25.2% from last year.

    Weekly coal production in Northern Appalachia totaled an estimated 2.4 million st, up 2.3% from the previous week and up 14.2% from last year.

    Year-to-date production totaled an estimated 91.6 million st, down 12.2% from last year, and would total 101 million st on annualized basis, down 13% from last year.

    In the Illinois Basin, weekly coal production totaled an estimated 2.3 million st, up 4.8% from the prior week and up 11.5% from the year-ago week.

    Year-to-date production totaled an estimated 91.8 million st, down 18.6% from last year, and would total 101.4 million st on an annualized basis, down 18.2% from last year.

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    Baogang to provide technical support for India's steel giant

    Baogang Group has reached a cooperation agreement with Jindal Steel and Power Ltd (JSPL) on providing technical services for JSPL, reports Baotou Daily.

    The agreement is designed to support the Belt and Road Initiative and is expected to increase production and improve product quality.

    Baogang Group, or Baotou Iron and Steel Group, is an iron and steel State-owned company based in Baotou, Inner Mongolia autonomous region. It is the largest steel business based in the autonomous region, and one of the oldest iron and steel industrial bases in China, with a large production base of iron and steel, and the largest scientific research and production base of rare earth metals in China.

    Baogang Group has been well-received in the Indian market for their high quality products and flexible service.

    JSPL is a steel and energy company, based in New Delhi, India. Backed by the $18 billion diversified Jindal Group conglomerate, JSPL is the third largest steel producer in India. The company produces steel and power through backward integration from its own captive coal and iron-ore mines.
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    SEC said to probe Rio Tinto on Mozambique deal impairments

    The US Securities and Exchange Commission (SEC) is investigating a $3-billion impairment charge Rio Tinto Group booked on a Mozambique coal deal almost four years ago, according to a person familiar with the matter.

    The investigation is ongoing and is separate to an internal Rio review into payments the company made to a consultant regarding an iron-ore project in Guinea, said the person, who asked not to be identified because the investigation is private.

    Rio acquired Riversdale Mining Ltd. in 2011 in an all-cash deal for A$3.9-billion ($2.9-billion), before writing the value of the assets down by $3-billion two years later. The charge, part of a wider $14-billion in asset writedowns, led to the departure of then Chief Executive Officer Tom Albanese. The company later sold the assets for $50-million.

    Separately, Rio is investigating a $10.5-million payment it made in connection with its Simandou project in Guinea to a French banking consultant who was a university friend of President Alpha Conde of Guinea.

    The company said November 9 that following a review by an external law firm, it decided to report the findings to the US Justice Department, the SEC, the UK’s Serious Fraud Office and Australia’s Securities and Investments Commission. Rio subsequently fired two of its top executives in connection with the matter.
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    Huanghua port exceeds 2016 coal shipment target

    Northern China's Huanghua port shipped 158.16 million tonnes of coal via six coal terminals as of November 27, exceeding its shipment target of 157.70 million tonnes for 2016.

    Once exclusive to Shenhua Group, the port has been opened to all coal producers since 2015.

    Shenhua started the construction of Huanghua port on December 25, 1997 and put it into operation in late 2001.

    Up to now, Huanghua port has a handling capacity of 200 million tonnes after the finish of phase four project in late 2015.

    By 2020, its throughput capacity is estimated to reach 300 million tonnes, becoming the largest coal shipping port in northern China.
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    India imposes 5-year antidumping duties on coke imports from China, Australia

    India has imposed antidumping duties on coke imports from China and Australia, which will be effective over the next five years, according to a statement by the country's Ministry of Finance.

    Duties of $25.20/mt and $16.29/mt will be levied on imports from China and Australia, respectively, starting November 25.

    The antidumping application had been filed in December by the Indian Metallurgical Coke Manufacturers Association, whose members include coke makers Saurashtra Fuels Pvt. Ltd., Gujarat NRE Coke Ltd., Carbon Edge Industries Ltd., Bhatia Coke and Energy Ltd. and Basudha Udyog Pvt. Ltd, which together account for more than half of India's merchant coke output.

    But market participants stated that the duty of $25.20/mt imposed on Chinese coke imports was only a small fraction of the current price and might not boost the competitiveness of Indian alternatives.

    S&P Global Platts assessed metallurgical coke 64/62% CSR at $343/mt FOB North China, and $354/mt CFR India last Friday.

    Indian steelmakers were already mulling output cuts as most were exposed to soaring Australian coking coal prices in the last two quarters, sources said.

    Next on the agenda for coke and steel producers will be petitioning for the scrapping of the 2.5% import duty on coking coal, an Indian coke maker said.

    "It will face no opposition from anyone in the industry and should be passed quickly," the source said.
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    Iron ore price set to top $80

    On the Dalian Commodities Exchange iron ore futures added to 5.3% gains racked up on Friday with May contracts closing at 622 yuan ($90.50 a tonne) on Monday.

    Regulators recently upped trading fees and margin requirements to cool down the credit-fuelled speculation in iron ore, met coal and rebar, but volatility in the market show no signs of ending.

    The latest leg up came after a new 5-year planning document released by Beijing called for the closure of 100 – 150 million tonnes of steel capacity through the end of the decade to increase profitability of remaining producers and tackle pollution.

    Authorities are also pushing for consolidation of steel producers with a target of 60% market share for the top 10 steelmakers which should translate into higher prices for steel, iron ore and met coal.

    The import price of 62% Fe content ore at the port of Tianjin jumped 3% to $79.20 per dry metric tonne on Friday. The index is likely to breach $80 a tonne on Monday – the highest since mid-September 2014 according to data supplied by The Steel Index.

    Year to date the price of the steelmaking raw material is up 84% following near-decade lows in December last year.
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    China stands firm on cutting excess steel, coal capacity

    The Chinese government has reiterated its firm stance on cutting excess steel and coal capacity in response to an emerging backlash from producers prompted by recent price hikes.

    China retired 45 million tons of steel and 250 million tons of coal production capacity by the end of October, meeting its full-year goals ahead of schedule.

    But problems have also emerged, especially in some companies seeking to add capacity as an unexpected demand-supply gap pushes up prices of steel and coal products.

    "The rising prices have triggered worries in the market and to some extent shaken the resolve of some local authorities and enterprises. But we must stay clear-headed that the price volatility has been driven by temporary demand growth, magnified by speculation, and does not indicate a long-term trend," Xu Kunlin, deputy secretary general of the National Development and Reform Commission, said at a press conference Wednesday.

    The steel and coal industries are plagued by overcapacity and the government's resolution is unwavering, Xu said.

    Since the capacity cuts were blamed for causing a supply shortage, it will not be easy to resolve the combination of a short-term crunch and long-term excess.

    Gu Shengzu, a member of the Financial and Economic Affairs Committee of the National People's Congress, said the rapid price increase created a dilemma for policymakers about whether to stabilize supply or stick to reducing capacity.

    "There is an urgent need to streamline relations between the government and market, and market-driven, law-based measures should be adopted in capacity cuts," Gu said.

    The State Council hopes to strike a balance. The authorities will press ahead with capacity cuts while paying more attention to price changes, according to a statement released after an executive meeting chaired by Premier Li Keqiang on Wednesday.

    An array of measures to curb prices have been put in place, and the priority is still on downsizing those bloated sectors. As the targets have been met ahead of schedule, the next step is to ensure the stated cuts are effective.

    Investigation teams will be dispatched to Hebei and Jiangsu, where capacity cut rules were breached, as part of efforts to intensify supervision, the State Council said, citing cases of fraud and illegal production in the provinces.

    "We should give zero tolerance to steel and coal producers that fail to meet national and environmental standards," Premier Li said.

    Local governments have been asked to give financial support to and create jobs for workers made redundant by the cuts. In May, the Ministry of Finance announced 100 billion yuan ($14.5 billion) in aid for steel and coal companies to resettle laid-off workers.

    Mergers and acquisitions will be encouraged for further consolidation in the two industries, the statement said.

    China is the world's largest producer and consumer of steel and coal. Cutting overcapacity is a high priority as the two industries have become a major drag on growth.

    Steel capacity will be cut between 100 million tons?and 150 million tons by 2020, while about a half billion tonnes of coal capacity is scheduled to be slashed in the next three to five years.

    In the coming year, it is important to phase out excess capacity through reforms, Premier Li said, highlighting further steps in mergers and acquisitions in steel enterprises, and the integration of coal mining and power generation.

    "The task will still be difficult. Problems will be accentuated by hysteresis effects from the re-employment of redundant workers and the unsettled debts of closed coal mines," said Jiang Zhimin, vice president of China National Coal Association.
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    Chinese govt sends steel capacity cut investigators to Hebei and Jiangsu

    Work teams from the State Council, China's cabinet, have been dispatched to two provinces to see if steel capacity cut rules were breached, Xinhua News Agency reported on November 28.

    The move follows a State Council executive meeting last week which revealed that some companies might still be seeking to add capacities, despite a reduction target of 45 million tonnes per annum set for this year.

    The investigators have arrived in Qinhuangdao city of Hebei province and Xuzhou in Jiangsu province to conduct on-site investigations into local steel companies' practices.

    The investigation teams are composed of officials from ten government departments and industry associations including the National Development and Reform Commission and Ministry of Industry and Information Technology.

    China, the largest producer and consumer of steel and coal in the world, has put capacity reduction a high priority, as the two oversupplied industries have become a drag on economic growth.
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    Shanxi withdraws licenses of 15 coal mines

    North China's Shanxi province has withdrawn the licenses of 15 coal mines, Xinhua reported, citing local authority.

    The decision will cut annual coal production capacity by 10.6 million tonnes, according to the Shanxi land and resources department.

    The 15 mines belong to six State-owned enterprises including Shanxi Coking Coal Group. Production capacity of the mines is between 300,000 and three million tonnes a year.

    Shanxi province supplies about a quarter of China's coal.

    China intends to slash about 500 million tonnes of coal capacity in five years starting from 2016 to address overcapacity in this sector.

    In early October, Shanxi raised its target for cutting surplus coal capacity this year from 20 million tonnes to 23.25 million tonnes.
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    Germany's Merkel says G20 must tackle global steel glut

    The G20 group of leading economies must find a solution to excess capacity in the global steel industry, German Chancellor Angela Merkel said on Saturday, adding that overproduction in some countries was causing job losses elsewhere.

    Merkel said Germany, which takes over the G20 presidency next month, would push for a collective solution for the worldwide glut that has dampened steel prices for years and raised tensions between China and other major producers.

    European and U.S. leaders have pressed China to accelerate capacity cuts, blaming its big exports for slumping prices and accusing it of dumping cheap steel in foreign markets.

    "For example, at the G20 summit in China, we discussed in a very open manner overproduction in the steel sector, which is resulting in people in the steel industry losing their jobs," Merkel said in her weekly podcast.

    "We must solve this problem together, so that we don't have a situation where one country wreaks damage on other countries," Merkel added.

    China has vowed to cut capacity by 45 million tonnes this year, though it said in August it was behind on that target.

    Last month, the European Union set provisional import duties on two types of steel entering the bloc from China to counter what it said were unfairly low prices. The measure was criticized by Beijing, which accused the bloc of engaging in protectionism.

    Some 5,000 jobs have been axed in the British steel industry in the past year as it struggles to compete with cheap Chinese imports and high energy costs.

    G20 leaders pledged at a summit in China in September to work together to address excess steel capacity that has punished the global industry with low prices for years.

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    China Oct coking coal imports surge 67.8% on yr, down 7.2% on mth

    China imported 5.16 million tonnes of coking coal in October, surging 67.8% on year, showed the latest data from the General Administration of Customs (GAC).

    However, the volume dropped for the second consecutive month by 7.2% from September's 5.56 million tonnes, influenced by a 2.8% drop of crude steel output in the month, fluctuated exchange rate, as well as domestic buyers' reluctance to accept expensive imported material.

    According to the GAC, value of the imports stood at $485.87 million, gaining 110.7% on year and 26.4% on month, which translated into an average price of $94.16/t, up 36.15% from the previous month.

    Analysts attributed the year-on-year rise of imports value to insufficient supply in Australia and Mongolia, caused by rainstorms and mining constraints.

    Over January to October, the country's imports of coking coal rose 23.7% on year to 48.63 million tonnes; the value of the imports was $3.40 billion, rising 4.3% year on year.

    Separately, China's exports of coking coal doubled on the year to 10,000 tonnes in October, down 80% from September, with the value at $695,000, surging 155.6% from the year-ago level.

    In the first ten months of the year, China exported 0.93 million tonnes of coking coal, increasing 23.3% compared to corresponding period last year, with total value of the exports flat year on year at $83.46 million.
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    Shanxi Oct coke output rises 17pct on year

    Northern China's Shanxi province produced 7.44 million tonnes of coke in October, rising 17.3% year on year, showed data from the provincial Statistics Bureau.

    Over January to October, coke output of the province edged up 0.7% from the year-ago level to 67.54 million tonnes.

    Shanxi is China's top one coke province, producing half of the country's total coke output, and exporting above 80% of coke exported to other countries.

    By end-2015, Shanxi had coke production capacity of 145 million tonnes per annum (Mtpa), mainly from 72 independent coking enterprises each with capacity above 2 Mtpa.

    Affected by domestic oversupply and sluggish demand, Shanxi saw its coke output, prices and profits plunge in recent years. The provincial government has rolled out policies to stabilize coke output and promote transformation of coking industry, said Ji Mingde, vice director of Shanxi Economy and Information Commission.
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