Mark Latham Commodity Equity Intelligence Service

Tuesday 17th November 2015
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    Oil and Markets

    The fluctuations in crude oil have dictated the direction for the stocks. A slide in oil futures has more times than not resulted in a tumble in the broader stock market. Conversely, a rise in oil prices, as was seen on Monday when West Texas Intermediate oil CLZ5, +0.60%  saw a 2.5% pop to settle at $41.74 a barrel, has delivered a bump to stocks. The following table from Dow Jones data show that a strong positive correlation between oil and stocks has really taken hold in July and August of this year.

    All the main U.S. indexes surged sharply higher on Monday, highlighted by a more than 230-point rally in the Dow Jones Industrial Average DJIA, +1.38%

    Year Same Direction (Down days) Same Direction (Up days) Total Same Direction Total Days % of Days
    2014 64 67 131 252 51.98
    2015 78 57 133 221 60.18
    Since Aug. 19 25 20 45 63 71.43
    Aug. 19-Nov. 14, 2014 17 17 34 63 53.97
    Aug. 19-Nov. 15, 2013 26 19 45 64 70.31

    More than 70% of the time that oil has moved in a given direction, stocks have followed. Compare that with a roughly 52% correlation for 2014. For all of 2015, the correlation is a little over 60%, according to Dow Jones data.

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    Sumitomo Metal seeks stakes in copper, gold mines

    Sumitomo Metal Mining is looking to snap up stakes in copper and gold mines, taking advantage of its sound finances and a slump in commodity prices to bolster future growth, its president said.

    "We have a perfect opportunity now to make use of strength and pursue good deals that would benefit us in future," Sumitomo Metal President Yoshiaki Nakazato told a news conference.

    A number of companies had approached the firm about possible sales, he said, but declined to elaborate.

    Several miners have indicated they are on the look out for copper assets, as slowing demand growth in China, the world's biggest consumer of industrial metals, has pushed copper prices to six-year lows. Gold is at nearly five year lows.

    Companies such as Glencore have come under pressure from investors to cut debt amid a broadranging slump in commodity prices.

    Nakazato said Sumitomo Metal was sticking with a long-term goal to boost its annual copper output from the mines in which it holds a stake to 300,000 tonnes in 2021, up from planned output of 175,000 tonnes this year.

    Sumitomo Metal was also unlikely to reach full capacity at its Sierra Gorda copper mine in Chile until April or May, he said, confirming indications from another company official last week that the schedule would be delayed from December.

    The delay was due to problems with the mine's molybdenum plant, he said.

    The Sierra Gorda mine, owned jointly with Polish producer KGHM Polska Miedz, began commercial production at the end of June and the setback adds to a slew of production delays at Chilean copper mines this year.

    While its basic finances are healthy, Japan's second-biggest copper producer still slashed its full-year profit forecast this month, blaming the plunge in the prices of copper and nickel and the delayed ramp-up at Sierra Gorda.

    Read more at Reuters

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    The West should not right off the Middle East

    We should respond with similar generosity to some of the words spoken immediately after the Paris abominations. Bernie Sanders said terrorism was a consequence of climate change. Janine di Giovanni said: “What really worries me is that these attacks will help the Right wing”. Jean-Claude Juncker said that the murders strengthened the case for the free movement of migrants in Europe. Stop the War said that France brought the attacks on itself by bombing Syria. In each case, people were responding in the way that human beings do to trauma, by retreating into the familiar, by saying, in effect, “This just proves whatever it was I was arguing a moment ago.”

    Our larger purpose, though, was to engage with local politicians. It is worth recalling what sparked the revolution in 2010 – which spread from Tunisia across North Africa and the Middle East. The risings began when Mohamed Bouazizi, a market trader, was driven to the horrific extreme of self-immolation because he had been denied ownership of his own goods and the right to engage in commerce. His was a protest against the violation of property rights, and he was not alone. In an authoritative study of the Arab Spring, the Peruvian economist, Hernando de Soto, chronicled hundreds of cases of entrepreneurs in Arab countries being driven to suicide by police corruption and harassment.

    The Arab Spring, in other words, began as a movement against arbitrary government. Citizens were fed up with living under regimes that could make up the rules as they went along, seizing property without due process, rigging the law in favour of their clients. They wanted freedom: freedom of speech, freedom of assembly, freedom of worship, freedom of association and, not least, freedom to enjoy their own property.

    The answer ought to be obvious. Religion isn’t going to disappear, much as some Leftists might like it to. The question is whether observant Muslims can be represented by values-based democratic parties, of the sort that the Western Right takes for granted, but that have so far barely existed in the Arab world except in Morocco and Tunisia.

    No one can definitively answer that question, and the recent history of North Africa cautions against excessive optimism. Still, as Benedikt Koehler – a fellow CapX contributor and also a conference delegate – has regularly argued here, freedom and free markets were an integral part of early Islam. The aspiration to liberty is universal. Don’t write off an entire region.

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    BHP Reviews Mine Operations Management After Dam Disaster

    BHP Billiton Ltd. said it’s reviewing the operating structure of mining joint ventures with companies including Glencore Plc and Anglo American Plc in the wake of the deadly Brazil mine disaster.

    The world’s biggest mining company is reviewing Samarco Mineracao SA, its joint iron ore operation with Vale SA in Brazil’s Minas Gerais state, after tailings dams burst Nov. 5, sending a torrent into a valley below and killing at least nine people. It’ll also assess the Antamina copper operation in Peru and its Cerrejon coal venture in Colombia, BHP Chief Executive Officer Andrew Mackenzie told investors Monday on a conference call.

    Three of its mining joint ventures - Samarco, Antamina and Cerrejon - are operated by standalone entities owned by the partners, while in BHP’s petroleum business one of the partners acts as the operator, he said. BP Plc and Chevron Corp. are among BHP’s oil partners. Of 19 major assets in its portfolio of wells to mines, BHP operates 12 of the sites, according to a March filing.

    “That is the kind of arrangement we need to review and have been reviewing,” Mackenzie told investors on the call. BHP will assess “whether a more petroleum-type model might be more appropriate in the future,” he said.

    While any changes to the structure of joint ventures could speed up decision-making and allow for the adoption of more unified standards and working practices, it would be complicated for companies that own an equal share of a joint venture to select a single producer to take the lead, said Sydney-based Deutsche Bank AG analyst Paul Young.

    “The issue is, when you have equal ownership and you have one operator, who’s going to be the operator and who do you choose?” Young said by phone. Any change would likely take years, rather than months, he said.

    BHP and Glencore both hold a 33.75 percent stake in Compania Minera Antamina, which operates Peru’s Antamina copper mine, while Teck Resources Ltd. has 22.5 percent and Mitsubishi Corp. holds 10 percent, according to filings. Glencore, BHP and Anglo American each have a third share in Cerrejon Coal Co., the filings show.

    In addition to its consideration of operating structures, BHP is also conducting a review of dam facilities across the organization, Mackenzie told investors on the call. “We are hungry for the lessons that we can learn from Samarco,” he said. “We are clearly looking at ways we can run the vast bulk of our business even better.”
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    Boart Longyear Q3 loss widens

    Boart Longyear's third quarter loss has widened 58 per cent and the drilling services company does not expect the impact of its cost cutting measures to show in results until the next financial year.

    Boart's net loss for the three months to September 30 was $US24.8 million ($A34.87 million), compared to $US15.7m for the prior corresponding period, after revenue dropped 21.9 per cent to $US186.8m.

    "Drilling activity levels continue to be low and we are also battling headwinds in prices and foreign exchange rates," executive chairman Marcus Randolph said.

    Chief executive Richard O'Brien stepped down in August after Boart reported a blowout in half year losses to $US152.3 million ($A214.13 million) to June 30.

    International driller Boart Longyear sees its cost and productivity improvements are continuing to gain traction despite a statutory operating loss of $US24.8M in the Sept qtr (Q3), a 58% deterioration from Q3 2014. The loss from trading activities was $7.7M ($6.2M).

    Q3 revenues fell 22% to $186.8M ($293.3M), due to lower volumes and unfavourable $US exchange rates. Liquidity improved to $153M, $8M higher than at end-June.
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    CO2 Emissions Data

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    Oil and Gas

    No value in equity unless Oil rebounds

    Oil Dealmakers Find Slim Pickings Among Premium-Priced Explorers
    Crude needs to rebound to justify valuations, FirstEnergy says
    Industry will have `almost no value' if oil doesn't recover

    Wannabe dealmakers in the oil industry are stymied by a fundamental problem: there’s a mismatch between the price of crude and the value of companies.

    Oil’s slump prompted speculation that explorers and producers, collectively known as E&Ps, were on the cusp of an acquisitions boom as many of the smaller companies burned through cash. That’s unlikely with crude languishing below $50 a barrel, according to research from FirstEnergy Capital LLP.

    “Many names among the E&Ps require a much higher oil price than $60 a barrel to justify their valuation and you won’t have a transaction if you don’t pay a premium to the share price,” Stephane Foucaud, an analyst at FirstEnergy in London, said by phone. If crude doesn’t rebound, “there’s almost no value in the oil exploration and production sector.”

    Image titleRoyal Dutch Shell Plc’s $70 billion move for BG Group Plc helped lift the value of merger and acquisition proposals this year to about $150 billion, from roughly $110 billion in the same period last year, but deals involving smaller companies have been failing, according to data compiled by Bloomberg. Almost $30 billion of this year’s takeover approaches have been rejected, the data show.

    Santos Rebuff

    Santos Ltd. rejected an offer worth $11.3 billion including debt from Scepter Partners, calling it “opportunistic.” Canadian Oil Sands Ltd. snubbed a C$6.6 billion ($4.96 billion) bid from Suncor Energy Inc. saying it “substantially” undervalued the company.

    “Reaching a consensus on fair value between buyer and seller presents challenges,” Martin Ewan, an oil and gas corporate partner at law firm Pinsent Masons LLP, said by e-mail. “Oil price volatility adds a layer of complexity to M&A deals not typical during more stable market conditions.”

    A gauge of volatility in U.S. crude prices has almost doubled on average this year to the highest since 2009.

    French oil giant Total SA said in October it wouldn’t bid for overvalued explorers and producers, which were trading as if crude were at $70 to $80 a barrel. Adding a takeover premium would bring their valuation closer to a $100 scenario, Chief Financial Officer Patrick de la Chevardiere said Oct. 29.

    Out of 18 oil E&P companies tracked by FirstEnergy, only four can give positive returns for shareholders with oil at $60 a barrel, Foucaud said. Should prices rise to about $83, all but one would deliver returns.

    Brent, currently trading at about $44-$45 a barrel, will probably recover to $58 in 2016 and may take a further two years to reach $70, according to the median estimate of 48 analysts surveyed by Bloomberg.

    Feeding Frenzy

    Most recently Anadarko Petroleum Corp., the third-largest U.S. natural gas producer, said it withdrew an all-stock offer for Apache Corp. after the company refused to engage in substantive talks. In a prolonged slump, targeted companies may find themselves less able to refuse prospective buyers.

    Crude’s collapse has hit E&Ps hard, wiping off about 45 percent of their market value this year according to the index of 18 companies tracked by FirstEnergy. In comparison, the Stoxx Europe 600 Oil & Gas index, which includes the largest energy companies, has returned 3.5 percent.

    The lack of completed deals “indicates that people aren’t yet at the completely distressed point, or on the buy-side they don’t believe that prices have bottomed out yet,” said Michael Wachtel, a partner at Clyde & Co., who has worked for more than 20 years in the oil and gas industry. The price slump has left many companies facing mounting debts and ratings cuts. A “feeding frenzy” may ensue in the first half of 2016 once buyers believe prices have reached their lowest point, Wachtel said.

    There’s no shortage of funds for takeovers. The world’s six biggest publicly traded producers have more than a half-trillion dollars in stock and cash to snap up rival explorers, according to data from corporate filings compiled by Bloomberg. Ewan of Pinsent Masons said he’s noticing a “very healthy” interest in North Sea exploration and production assets.

    “We are in a transition period where industry players have to adjust to a lower price environment and where buyers and sellers need to find a common ground for deals to happen,” said Lionel Therond, a London-based equity analyst with Standard Bank Group Ltd. “No doubt that price aspirations will go down as desperation sets in.”

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    OPEC Export Price Falls Below $40 for First Time Since 2009

    The average price of crude sold by OPEC fell below $40 a barrel for the first time 2009, underscoring the financial cost of the group’s strategy to defend its market share.

    The daily OPEC Basket Price fell to $39.21 a barrel on Nov. 13, according to an e-mail on Monday from the organization’s secretariat in Vienna. The basket, an average of export grades from each of the group’s 12 members, typically trades below international oil futures as some OPEC nations pump denser or higher-sulfur crude that’s less profitable to refine.

    Oil has slumped since the middle of last year as the Organization of Petroleum Countries keeps output elevated to pressure rivals it sees as responsible for creating a global surplus. A decline in production among its higher-cost competitors including U.S. shale drillers has now slowed, with output still above last year’s level. With OPEC members’ revenues diminished, the group may reconsider its approach if the price slump persists, according to the International Energy Agency.

    Low oil prices aren’t just problematic for higher-cost producers, said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. “It is also providing a challenging fiscal environment” for OPEC nations, he said.

    OPEC’s annual revenues may be curbed to $550 billion at current prices from an average of more than $1 trillion in the last five years, Fatih Birol, executive director at the IEA, said in London on Nov. 10. Even Saudi Arabia, the group’s biggest member, faces a budget deficit this year that the International Monetary Fund predicts will exceed 20 percent of gross domestic product.

    Still, IEA expects the price slump would need to persist for several years before the kingdom reconsiders its current strategy. OPEC Secretary-General Abdalla El-Badri, said this month that the global market is on track to rebalance next year.

    OPEC ministers will meet to review their current policy on Dec. 4 in Vienna.

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    G20-Russian Energy Minister sees oil supply-demand imbalance narrowing

    Russia, the world's top oil producer, sees the gap between global oil supply and demand narrowing gradually, the country's Energy Minister Alexander Novak told reporters on the sidelines of the G20 summit in Turkey.

    He added that excessive oil supply could be eliminated in the second half of next year.

    The Organization of Petroleum Exporting Countries (OPEC) was ready to hold consultations with Russia to assess the situation on the global oil market, Novak said, adding however that there was no joint position within OPEC regarding oil output cuts.

    Read more at Reuters
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    India Plans to Free Natural Gas Prices Under New Auction Rules

    India plans to free prices of locally extracted natural gas and allow producers marketing autonomy as part of new rules for auctioning exploration blocks.

    The government also proposes to introduce a revenue-sharing model with operators, replacing the current profit-sharing mechanism, according to a notice on the oil ministry’s website. The plan includes a uniform licensing policy that will allow operators to explore all forms of oil and gas resources, including coal-bed methane, shale gas and oil, tight gas and gas hydrates.

    The government’s initiative follows petitions from gas producers that the current tariff is too low to support exploration and production costs. State control on fuel pricing has prompted oil majors such as Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell Plc to stay away from India’s exploration-block auctions, which started in 1999. BP Plc, Europe’s second-biggest oil company, is the only overseas company with any significant presence in India’s exploration sector.

    Reliance Industries Ltd., which produces gas from a deepwater block in the Bay of Bengal, reversed morning losses in Mumbai, rising as much as 0.5 percent to 937.35 rupees. Cairn India Ltd. rose as much as 1.2 percent, overcoming a decline of up to 1.3 percent . Oil & Natural Gas Corp. gained as much as 0.9 percent, recovering from a 3.3 percent drop.

    Prime Minister Narendra Modi has made energy security a priority for India, which imports the bulk of its oil and gas. The government announced open-market rates for gas extracted from 69 small fields slated for auction by next month, Oil Minister Dharmendra Pradhan said on Sept. 2.

    “On the similar lines, it is proposed to provide pricing and marketing freedom for natural gas to be produced from the areas to be awarded under the new contractual and fiscal regime in order to incentivise production from these areas,” according to the statement.

    India will also move to an open acreage licensing policy, allowing companies to submit bids for areas of their choice, according to the statement. The new rules, which have been sent to the explorers for their opinion by the end of this month, are aimed at “ease of doing business.”

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    Key Petrobras union still on strike over back-pay, asset sales

    A union representing workers at state-run oil company Petroleo Brasileiro SA in Brazil's most important production area said on Monday it remains on strike over back pay and the state-owned oil company's plans for assets sales.

    Sindipetro Norte Fluminense workers operate oil platforms and other services in the Campos Basin, the source of 64 percent of Brazil's oil production and 34 percent of its natural gas output.

    SindipetroNF on Saturday rejected a call to end the two-week-old strike by FUP, the largest Brazilian oil workers union federation and one of the last strong power bases for embattled Brazilian president Dilma Rousseff.

    An extended strike risks deepening Brazil's economic recession.

    The walkout is also heaping further operational and financial pressure on Petrobras, which is struggling to maintain every source of cash as it tries to pay down about $130 billion of debt, the largest in the world oil industry.

    "The rejection has created a confused situation," said Fernanda Vizeu, a SindipetroNF press officer. "Members want pay for all the days they were on strike, not half, and want a broader discussion of budget cuts and asset sales."

    A previous split between SindipetroNF and its parent entity FUP in 2013 was resolved quickly she said.

    FUP unions went on strike Nov. 1 in an effort to reverse Petrobras' plans to cut nearly $100 billion in capital expenditures over five years and sell $15.1 billion of assets by the end of 2016. The union was also seeking an 18 percent pay hike.

    With Petrobras admitting to production cuts of as much as 13 percent from pre-strike levels, the walkout was the worst at the company in 20 years.

    On Friday, FUP recommended a contract agreement that would give workers a 9.53 percent wage hike, back pay for half the days lost on the picket lines and the promise of a management-union committee to discuss budget cuts and assets sales.

    SindipetroNF members are demanding that the committee's agenda be broadened to the issue of whether Petrobras should sell shipping unit Transpetro and natural gas unit Gaspetro.

    Deyvid Bacelar, a FUP member and union representative on the Petrobras board of directors, said the decision by SindipetroNF could hurt their goals.

    "The idea to suspend the strike was to gain time to develop support with members of the government and social movements," Bacelar said. "We were not going to achieve our demands on our own."

    Read more at Reuters

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    Brazil prosecutors say bribes paid in Petrobras Texas refinery deal

    Brazilian police and prosecutors investigating corruption at Petroleo Brasileiro SA said on Monday they have evidence that bribes were paid as part of the state-run oil company's $1.2 billion purchase of Pasadena Refining Systems Inc in 2006.

    At a news conference announcing a new round of searches, seizures and arrests, federal prosecutor Carlos Fernando dos Santos Lima said the bribes related to the U.S. Gulf Coast-based refinery could lead to the cancellation of the purchase.

    After Monday's police operation, two were arrested and five brought in for questioning, prosecutors said, the latest twist in a nearly 20-month probe of price-fixing and political kickbacks at the company known as Petrobras.

    "This case is important because, who knows, we might be able to annul the sale or recover assets belonging to the Brazilian public," Lima told reporters in Curitiba, Brazil where the investigation is being run.

    The prosecutor did not say how a U.S.-based transaction could be canceled, but throughout the corruption prosecution, serious efforts have been made to return illegally diverted funds to the government or Petrobras.

    The prosecutor said Petrobras lost $792 million in the purchase of the 100,000-barrel-a-day refinery from Astra Oil, a unit of Belgian-controlled Astra Transcor Energy. He also alleged that Petrobras overpaid for the facility, claiming it was in terrible condition when acquired.

    Petrobras paid $360 million for half of Pasadena Refining in 2006, more than eight times what Astra paid for the whole refinery a year earlier. By 2012, Petrobras had sunk $1.18 billion into it including the cost of buying out Astra's remaining half after a legal dispute between both firms.

    Lima cited evidence that Astra paid $15 million in bribes in the sale of the initial 50 percent of the Pasadena refinery to Petrobras in 2006.

    Petrobras bought the refinery as its exports of Marlim-grade heavy crude and other oil blends grew, largely to the United States. It was hoping to capture extra profit for those exports by refining those exports into fuels such as gasoline. A congressional inquiry found that it paid far too much for the refinery.

    "Besides being obsolete and in a terrible state, the refinery did not have the capacity to refine Marlim crude produced by Petrobras," a statement by the prosecutors said.

    In Houston, a voice mail request for comment to Astra Oil Company LLC was not immediately answered. An Astra Transcor Energy employee in Rotterdam declined to comment. A corporate affairs official in Zug, Switzerland did not immediately return calls requesting comment.

    Read more at Reuters

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    Trafigura Reveals $4.3 Billion in Oil Payments to Governments

    Trafigura Pte Ltd. disclosed $4.3 billion in oil-related payments to governments in 2013 as part of a push toward more transparency by the third-largest independent oil trader.

    The firm said the funds were used to purchase crude oil, refined petroleum products and gas from national oil companies in countries that have signed up to the Extractive Industries Transparency Initiative, or candidate countries. It revealed payments made in Colombia, Ghana, Nigeria, Norway, Peru, and Trinidad and Tobago in its inaugural responsibility report.

    The commodity trading industry, much of it centered in Switzerland where traders aren’t directly regulated, has long been noted for its opacity and lack of disclosure. While Trafigura is based in Singapore it has major operations in Geneva, as do closely held competitors Vitol Group -- the largest independent oil trader -- and Gunvor Group Ltd. In the past, the traders have cited competitive reasons for their furtive ways.

    Trafigura is the first major independent commodity trader to report oil-related payments to member-states of the EITI, a voluntary disclosure program for oil and mining companies aimed at rooting out and preventing corruption. The report “sets out an ambition to become acknowledged leaders in our sector in the way we manage corporate responsibility,” Chief Executive Officer Jeremy Weir said in a statement. “It also expresses our awareness that we have more work to do.”

    Trafigura’s decision to report payments comes amid a schism among members of Switzerland’s tight-knit commodity-trading industry, which accounts for about 4 percent of the nation’s gross domestic product.

    The country that’s home to more than 500 commodity-trading companies has decided not to impose mandatory regulations on the sector despite calls to do so by non-governmental organizations. Government officials have encouraged other trading houses to join Trafigura in disclosing payments under the EITI framework to improve transparency.
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    Niko Resources to give stake in NEC-25 gas block to RIL, BP

    Image Source: Economic TimesPTI reported that cash-starved Niko Resources of Canada has decided to quit Reliance Industries' gas discovery block NEC-25, off the Odisha coast, by divesting its 10 per cent stake to the existing partners.

    Niko said that "In the second quarter of fiscal 2016, the company elected to withdraw from the NEC-25 block and relinquish its interest to the remaining interest holders."

    RIL is the operator of the block with 60 per cent interest while BP plc of UK has the remaining 30 per cent stake.

    Niko's 10 per cent interest will be split between RIL and BP in proportion to their equity stake. Gas discoveries in North-East Coast block NEC-0SN-97/1 (NEC-25) hold recoverable reserves of 1.032 trillion cubic feet.

    The Canadian company has been facing cash problems and had even put up for sale its interest in NEC-25 as well as 10 per cent stake in RIL's Krishna Godavari basin oil and gas producing block KG-DWN-98/3 or KG-D6. But it hasn't been able to find a buyer.

    With the upstream regulator DGH not approving a USD 3.5 billion plan for developing gas discoveries in block NEC-25 in the absence of its prescribed tests to confirm two of the finds, the partners opted to do the test on one of the finds and relinquish or give up the other.

    It said that "In the first quarter of fiscal 2016, the contractor group for the NEC-25 block elected to conduct a DST for one discovery in the block," adding that relinquishing its interest would eliminate the company's obligation to fund its share of the DST programme.

    RIL had in March 2013 submitted a USD 3.5 billion Integrated Field Development Plan for producing 10 million standard cubic meters per day of gas from the discoveries D-32, D-40, D-9 and D-10 in NEC-25 by mid-2019.
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    North Dakota's Bakken Pumps Less Oil for First Time in Decade

    The state’s Bakken oil region produced less oil in September than it did the previous year, the first time that’s happened in more than a decade. Output fell as low oil prices, exacerbated by the region’s remoteness, caused companies to scale back drilling operations and delay completing new wells.

    North Dakota’s portion of the Bakken produced 1.11 million barrels a day in September, down 1.1 percent from the same month a year ago, according to state data. Half the oil left the state by costly truck and rail routes, forcing producers to offer steep discounts. Along with an overall decline in crude prices, that’s prompted drillers to idle 67 percent of the rigs that were in the region last year.

    “The production drop was inevitable with the rig decline and the low-price environment,” Carl Larry, head of oil and gas for Frost & Sullivan LP, said by phone. “The cost of rail and trucking hasn’t gone down enough to keep production profitable, so it’s a precarious area to keep production steady or growing.”

    The year-over-year decline was the first since August 2004, when the region produced just 1,500 barrels a day. The drop was set in motion nearly a year ago, when falling oil prices made oil companies curtail spending and idle rigs.

    Companies that are drilling wells are waiting longer to complete them with hydraulic fracturing crews. The number of drilled but uncompleted wells, known as the fracklog, rose to 1,091 by the end of September, the first time it exceeded 1,000, according to data from state regulators.

    The price drop was felt harder in North Dakota because there’s only pipeline space for a fraction of the state’s output. Pipelines are cheaper than rail or truck transportation, so sellers have to offer discounts to make up for the difference in transportation cost. Oil at the wellhead in the Bakken region sold for $29.74 a barrel Friday, compared with $37.40 in West Texas, according to the trading unit of Royal Dutch Shell Plc.
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    Oil Theft Soars as Downturn Casts U.S. Roughnecks Out of Work

    The moon was a waning crescent sliver Sept. 9 when a man emerged from an oil tanker, sidled up to a well outside Cotulla, Texas, and siphoned off almost 200 barrels. Then, he drove two hours to a town where he sold his load on the black market for $10 a barrel, about a quarter of what West Texas Intermediate currently fetches.

    “This is like a drug organization,” said Mike Peters, global security manager of San Antonio-based Lewis Energy Group, who recounted the heist at a Texas legislative hearing. “You’ve got your mules that go out to steal the oil in trucks, you’ve got the next level of organization that’s actually taking the oil in, and you’ve got a gathering site -- it’s always a criminal organization that’s involved with this.”

    From raw crude sucked from wells to expensive machinery that disappears out the back door, drillers from Texas to Colorado are struggling to stop theft that has only worsened amid the industry’s biggest slowdown in a generation. Losses reached almost $1 billion in 2013 and likely have grown since, according to estimates from the Energy Security Council, an industry trade group in Houston. The situation has been fostered by idled trucks, abandoned drilling sites and tens of thousands of lost jobs.

    “You’ve got unemployed oilfield workers that unfortunately are resorting to stealing,” said John Chamberlain, executive director of the Energy Security Council.

    In Texas, unemployment insurance claims from energy workers more than doubled over the past year to about 110,000, according to the Workforce Commission. In North Dakota, average weekly wages in the Bakken oil patch decreased nearly 10 percent in the first quarter of 2015, compared with the previous quarter, according to the Federal Reserve Bank of Minneapolis.

    With dismissals hitting every corner of the industry, security guards hired during boom times are receiving pink slips. That’s leaving sites unprotected.

    “There are a lot less eyes out there for security,” said John Esquivel, an analyst at security consulting firm Butchko Inc. in Tomball, Texas, and a former chief executive of the U.S. Border Patrol in Laredo. “The drilling activity may be quieter, but I don’t think criminal activity is.”

    States are trying to get a handle on the theft, which can include anything from drill bits that can fetch thousands on the resale market, to copper wiring that can be melted down, to the crude itself. Texas lawmakers met earlier this month in Austin to craft a bill that would increase penalties related to the crime. A similar measure passed both houses of the legislature this year, but Republican Governor Greg Abbott vetoed it, saying it was “overly broad.” Lawmakers, at the urging of industry, are hoping to revive it next legislative session.

    In Oklahoma, law-enforcement officers recently teamed with the Federal Bureau of Investigation to intensify their effort. In North Dakota, the FBI earlier this year opened an office in the heart of oil country to combat crimes including theft, drug trafficking and prostitution.
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    Alternative Energy

    Solar power could be 10% cheaper than Indian coal-based power by 2020 - KPMG

    Consultancy firm KPMG said that solar power could be up to 10% cheaper than coal-based power by 2020.

    KPMG said that "Today, in India, solar prices are within 15% of the coal power prices on a levelised basis. While this may not fully capture costs such as grid integration costs for solar, our analysis suggests that even after considering the same, solar prices would be competitive with coal. Our forecast is that by 2020, solar power prices could be up to 10% lower than coal power prices."

    Solar power tariff in India touched a record low early this month with US-based SunEdison's winning bid of INR 4.63 per unit for a contract to sell 500 mw of solar energy to state-run NTPC Ltd. The tariff is about 15% less than the industry average and 8% below the previous low of INR 5.05 per unit quoted by Canada's SkyPower for a tender in Madhya Pradesh.

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    Floating windfarm offshore Portugal will be Europe's second ever

    Europe's second-ever floating windfarm will be built off the coast of Portugal under plans set out on Monday by a group of energy utilities and engineering companies.

    Floating offshore windfarms hold huge potential as the technology opens up large parts of the oceans, which would otherwise be too deep for traditional structures that can only be built in seas with maximum depths of about 50 metres.

    French gas and power group Engie, Portugal's EDP Renewables, Japan's Mitsubishi Corp and Chiyoda Corp, along with Spanish energy group Repsol , are teaming up to build the windfarm, which will comprise three or four turbines.

    The 25 megawatt (MW) facility is planned to be operational in 2018.

    The project will be the second floating offshore windfarm pilot in Europe, after Norway's Statoil said this month it would invest about $236 million in a 30 MW, five-turbine floating windfarm off Scotland.

    Engie said the aim of its project is to further demonstrate the economic potential and reliability of the floating offshore technology. It gave no financial details of the operation.

    EDPR has already tested a semi-submersible wind generator carrying a 2 megawatt Vestas turbine and which has produced more than 16 gigawatt-hours over almost four years of operation, having withstood extreme weather conditions.
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    Precious Metals

    Semafo Gold costs approaching $600 all in

    Shares of Semafo Inc defied a fresh slump in the gold price on Thursday, after announcing better than expected third quarter financial results on the back of a strong operational performance at its Mana Mine in Burkina Faso.

    After a 1% jump on Thursday bringing weekly gains to 8.5% Semafo is now worth $893 million on the Toronto Stock Exchange. The Montreal-based producer is one of only a handful of gold miners still in positive territory for the year.

    The company reported cash flow of $34.8 million during the three months to end-September, down from $40 million in the same quarter 2014, but ahead of expectations. That boosted the company's cash pile to a healthy $137.8 million.

    Net income came in at $14.5 million for the quarter, a 14% improvement on the back of production of 67,200 ounces during the quarter at industry leading all-in sustaining cost of $616/oz and $485/oz on a cash basis. Head grades were a mouthwatering 3.7 g/t, a 26% improvement thanks to a greater percentage of high-grade ore processed from the Fofina and Siou pits.

    Semafo's 2015 production guidance is at the midpoint between 245,000 – 275,000 ounces and the firm is targeting further costs reduction with an expected AISC of $630 – $650/oz for the year. Cash costs for 2015 is now predicted at between $485 – $505/oz.

    In February the company acquired Australia's Orbis Gold (ASX:OBS) in a deal valued at $139 million. The Orbis acquisition brought with it three gold projects in the West African country, notably Natougou, located about 600 kilometres east of Semafo's Mana mine.

    On Thursday Semafo said the feasibility study for Natougou is now 70% complete with publication expected early in the second quarter next year.

    According to an October  2014 scoping study by Orbis, Natougou has the potential for development of a large-scale low-cost open pit mine producing up to 217,000 of gold per annum (more than 700,000 in year one and two) with a 6.7 year mine life at an all-in cost of $619 an ounce. Capex for the Natougou project was put at $234 million.

    Burkina Faso is the continent's fourth largest gold producer after Mali and has commissioned eight new mines over the past six years. Burkina Faso is due to hold national elections at the end of the month.

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    Paragon Diamonds halts trading on capital, financial position woes

    Africa-focused Paragon Diamonds suspended trading Monday morning ahead of the company issuing a statement that revealed a precarious financial position.

    The miner, who committed to buy a 75% stake in Lesotho’s Mothae project from Canada’s Lucara Diamond (TSX:LUC) earlier this year, said it currently has limited working capital.

    Until a funding package has been secured, Paragon noted, there is a “material uncertainty” over the company’s financial position.

    It remains in talks with potential financers in order to secure funding to complete the acquisition of Mothae, develop the Lemphane project, also in Lesotho, and repay short-term debts

    However, it said it remains in talks with potential financers in order to secure funding to complete the acquisition of Mothae, develop the Lemphane project, also in Lesotho, and repay short-term debts, including a £500,000 (US$760,000) loan due on November 18.

    If that loan is not repaid within five business days, Paragon will be in default, and the lender will be able to demand immediate repayment of the loan at 120% of the outstanding amount, or the lender may convert the outstanding loan into shares in the company.

    Paragon’s situation reflects the challenging times currently affecting large parts of the diamond chain. Dealers are facing increasing difficulties to sell their existing inventory into softening markets, while also facing tougher financing conditions.

    At the same time, major players such as Anglo American-owned De Beers, the world’s No.1 diamond producer, are finding it difficult to place expected volumes of rough stones with traders and polishers.

    And even Russia's Alrosa, the world's top diamond producer by output in carats, said last month it was able to sell only 42% of the precious stones it mined in the quarter ending in September.

    Paragon’s stock was last quoted on Friday at 3.98 pence, and it has lost almost 33% of its value this year.
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    Base Metals

    Copper Is Crashing In China

    Shanghai Copper is down 4.6%, hitting fresh cycle lows not seen since March 2009. No clear catalyst is evident for now aside from stronger USDollar, Codelco's cuts, and more chatter of CCFD unwinds. If COMEX Copper holds these losses, it will be down for 10 straight days - the longest on record from what we could tell.

    Image titleChina is facing an unprecedented drop in refined copper imports as a slowing economy erodes demand, according to one of the country’s largest buyers. Shipments to the country will shrink 10 percent next year, Stephen Huang, chief executive officer of trading house Arc Resources Co., said in an interview.

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    Congo copper production down 8.2% in Q3 -chamber of mines

    Copper production in Democratic Republic of Congo, Africa’s top producer, slumped 8.2 percent year on year in the third quarter due to power shortages and low metal prices, the chamber of mines said.

    The mining sector accounts for about 20% of the central African nation’s gross domestic product (GDP) but falling mineral prices have threatened tax revenue and economic growth. The government has pledged to promote agriculture and services.

    In a report seen by Reuters on Saturday, the industry group said Congo produced 252,057 tonnes of copper in the third quarter, down about 22,500 tonnes from the same period last year.

    The chamber says electricity deficits hurt production by forcing operators to rely on expensive imports from neighbouring Zambia, which has hit by its own power problems, or even costlier generators.

    Congo surpassed 1 million tonnes of output in 2014 for the first time in its history last year but the chamber expects that figure to dip by five percent to about 980,000 tonnes this year.

    Glencore’s Katanga Mining unit suspended copper and cobalt production at one of its mines in September for 18 months, citing the low price of copper and a need to reduce operating costs.

    The mine had accounted for 15% of Congo’s copper output in 2014.

    On Friday, benchmark copper on the London Metal Exchange hit a six-year low at $4,787.50 a tonne before rebounding to close at $4,825.

    Meanwhile, gold production provided a bright spot, rising 27 percent in the third quarter compared to the same period in 2014. The chamber expects production to exceed 26 tonnes in 2015, a 33% increase over last year.

    Large new mines opened by companies including Randgold Resources, AngloGold Ashanti and Banro Corporation in the last four years have boosted Congo’s industrial gold output from nearly zero in 2011 to over 20 tonnes last year.

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    Rusal to decide on aluminium plant suspensions in mid-December

    Russian aluminium giant Rusal plans to decide in mid-December which aluminium smelters to suspend as a part of its plans to potentially cut up to 200,000 tonnes of production, Chief Executive Vladislav Soloviev told reporters on Tuesday.

    Rusal, the world's top aluminium producer, is looking to cut production, under pressure from sliding prices due to a market surplus.

    "We have not decided yet. We are now looking at KUBAL," Soloviev said. KUBAL, the sole producer of primary aluminium and the largest industrial facility in Sweden, has annual production capacity of 128,000 tonnes of aluminium.

    "We will take a decision along with the business plan in December," Soloviev said.

    He added that apart from KUBAL, Rusal was looking at the Kandalaksha smelter in North-Western Russia with annual capacity of 76,000 tonnes of aluminium production and the Novokuznetsk smelter in Siberia with another 195,000 tonnes, as potential plants for suspending.

    Three-month LME aluminium prices were at $1,467.5 per tonne on Tuesday, down from $2,029 a year ago.

    Rusal has trimmed its forecast for global aluminium demand growth in 2015 to 5.6 percent and raised its forecast for a global aluminium surplus this year by a third to 373,000 tonnes.

    Read more at Reuters
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    Steel, Iron Ore and Coal

    China Shenhua Oct sales slide 15.7pct on month

    China Shenhua Energy Company, a listed arm of coal giant Shenhua Group, saw its coal sales in October slide 15.7% on month and down 23.9% on year to 26.4 million tonnes, despite successive price cuts in the month.

    The company realized coal sales via northern Chinese ports at 13.8 million tonnes in October, falling 21.1% on year and down 18.34% on month, with sales over January-October falling 14.3% on year to 167.2 million tonnes.

    Of the October sales, 3.1 million tonnes or 63.3% of the total decreased volume were from coal sold via northern Chinese ports, compared with September sales.

    Coal shipped from Shenhua’s exclusive-use Huanghua port stood at 7.3 million tonnes or 52.9% of the total in October, sliding 22.3% on year and down 27% on month.

    Sales over January-October stood at 305.3 million tonnes, down 18.8% from the year prior, accounting for 75.5% of the sales target for the whole year, it said.

    On October 9, Shenhua offered a 15 yuan/t discount for monthly purchase at or above 40,000 tonne of 5,500 Kcal/kg NAR shipped coal and a 10 yuan/t discount for the same purchase volume of other coal varieties.

    Seeing continued slack sales, Shenhua offered its "Shenyou" variety a discount of 0.068 yuan/t/Kcal. It offered the price of its 5,500 and 5,000 Kcal/kg NAR coal at 374 yuan/t and 340 yuan/t FOB Qinhuangdao, down 16 yuan/t and 10 yuan/t from its self-produced mixed coal with the same calorific value , respectively.

    However, successive price cuts of large coal producers did not actually improve the current sluggish market, and they turned to stabilize prices before the end of the year, in the hope of a favorable turn amid the slight demand rebound from coastal power plants in November.

    In addition, the company produced a total 233.8 million tonnes of commercial coal or 85.5% of the annual target over January-October, down 9.2% on year.

    Coal output in October stood at 23.2 million tonnes, up 4.5% from September but down 1.3% on year.

    Coal imports over January-October slumped 98.5% on year to 100,000 tonnes, with October imports down 100% from a year ago to zero.

    Coal exports during the same period fell 35.7% on year to 900,000 tonnes, with October exports down 50% to 100,000 tonnes.

    Additionally, power output of the company in the first ten months this year decreased 3.3% on year to 186.49TWh, with October output down 1.9% to 17.77TWh.

    The company sold 173.51TWh of electricity during the same period, down 3.4% on year, with sales in the month falling 3.3% to 16.32TWh.

    Some downstream utilities predicted further price cut in Shenhua and other large coal producers in November, due to unimproved demand from downstream sectors, despite Shenhua’s steady pricing in November.
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    CIL to enhance washing capacity by 112 million tonne - Officials

    CIL, the government-owned near-monopolist in the sector, is to build 15 washeries across its various subsidiaries, through private companies under a build and operate model.

    Senior CIL officials said that CIL currently owns 17 washeries, five for coking coal (used by the steel and cement industries) and 12 for non-coking (for producing electricity). Of the new ones, six are to handle coking coal and the other nine the other. The cumulative washing capacity is estimated at 112 million tonnes (mt).

    The coking washeries would be awarded by Bharat Coking Coal (BCCL), the combined capacity being 18.6 mt. The non-coking ones would be distributed among Mahanadi Coal (four), South Eastern Coal (two) and Central Collieries (three).

    A senior CIL official added that "We are expecting three coking coal washeries to be operational by the end of next year."

    Mr Anil Swarup, secretary, ministry of coal, said that “Grades of coal range from G-1 to G-17; G-1 is the best quality, of 7,500 kcal of calofiric value or heating capacity. G-10 is the moderate grade, of 2,000-2,500 kcal. There have been disputes between power producers and CIL over quality and grading issues. All coal above G-10 grade would not be delivered unwashed after October 1, 2017."

    Mr Swarup said that "We have set up a committee to resolve all CIL's quality issues."
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    Sinosteel extends bond redemption date for second time

    China's state-owned Sinosteel said on Monday it has extended the date investors can start redeeming its bonds by a month until Dec. 16, the second extension since October.

    This second extension comes after Sinosteel had asked bondholders of its 2 billion yuan October 2017 bonds not to exercise a put option on Oct. 20, because the company would not be able to make a full payment, according to a letter seen by Reuters last month.

    The new extension would give investors in the debt issued by subsidiary Sinosteel Corp Ltd more time to review the matter, the company said in a statement posted on the website of one of the country's main bond clearing houses.

    In the statement, Sinosteel again offered shares of its Shenzhen-listed subsidiary Sinosteel Engineering & Technology Co Ltd as additional collateral for the debt, as an inducement for bondholders to stay invested.

    Sinosteel said it is negotiating the plan with related parties.

    Today's statement contained no additional information on repayment of scheduled interest due to bondholders. If Sinosteel is determined to have formally defaulted, it would be the first Chinese company to do so on a so-called enterprise bond, typically issued by large state-owned enterprises.

    Several Chinese firms have defaulted this year following the first default in 2014 by Chaori Solar. These include state-owned Baoding Tianwei, a power equipment firm, and Cloud Tech Live, a food producer which tried to reinvent itself as an Internet company.

    Read more at Reuters

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