Mark Latham Commodity Equity Intelligence Service

Friday 4th November 2016
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    Oil and Gas

    Steel, Iron Ore and Coal


    History rhymes...again!

    The number of early voters this year has already surpassed the total number of early votes in the 2012 election, according to data compiled by the United States Elections Project.

    At least 34 million people have already cast a ballot so far in this election cycle, the project found. In 2012, about 32.3 million votes were cast ahead of Election Day.
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    Annual profit drops 7 pct at Australia's Orica, dividend disappoints

    Orica Ltd, the world's top supplier of commercial explosives, reported a 7 percent drop in annual underlying profit on Friday, in line with analysts' forecasts, but paid a weaker dividend than expected.

    The company said conditions remained volatile in the second half of the year, despite sharp improvements in commodity prices helping its customers.

    "While there has been some external optimism on market conditions, we remain conservative and will continue to focus on business improvement initiatives that improve profitability and shareholder value," Orica said.

    Net profit before one-offs fell to A$389 million ($299 million) for the year to September from A$417 million a year ago. Analysts had expected a net profit of A$385 million, according to Thomson Reuters I/B/E/S.

    Orica's final dividend of 29 cents was 4.5 cents below analysts' forecasts.

    The company in May ditched its policy of never cutting dividends and switched to a payout ratio of 40 to 70 percent of underlying earnings to shore up its balance sheet and stave off a credit downgrade.
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    Emotional Molefe weighs judicial review and future after damning Public Protector report

    Eskom CEO Brian Molefe has indicated that he is weighing his future options as head of the State-owned electricity producer following the release of a Public Protector report, which raises serious questions about his role in facilitating a coal deal involving Tegeta, a mining company linked to the Gupta family. He also indicated that he was likely to take the report on judicial review, arguing that he had never been given a chance to present his version of events.

    The report by former Public Protector advocate Thuli Madonsela highlights a seemingly close relationship between Molefe and the Gupta family, with cellphone records showing that, between the period August 2, 2015, and March 22, 2016, he called Ajay Gupta 44 times and Gupta called Molefe 14 times. It also observes that the sole purpose of awarding contracts to Tegeta to supply Arnot power stationwas to fund Tegeta and enable it to purchase all shares in Optimum Coal Holdings, a company previously owned by mining giant Glencore.

    The report, titled the ‘State of Capture’, recommends that President Jacob Zuma convene a commission of inquiry within 30 days, which should be led by a judge selected by Chief Justice Mogoeng Mogoeng. The commission should complete its task and present the report with findings and recommendations to the President within 180 days.

    In an emotional statement made during the group’s interim results presentation on Thursday, Molefe said he took full responsibility for a decision to reject Glencore’s 2015 approach for a renegotiation of a R150/t coal supply agreement from the Optimum mine to Eskom’s Hendrina power station.

    In a high-profile battle, Eskom spurned Glencore’s argument that the contract was onerous and that the price should, thus, be increased to R530/t ahead of the expiry of the contract in 2018. The utility argued that it did not have the financialwherewithal at the time to entertain the increase. Glencoresubsequently placed the mine into business rescue and the asset was later controversially purchased by Tegeta, after receiving prepayment from Eskom – funding that the Public Protector report suggests was deployed to facilitate the acquisition.

    Molefe dismissed suggestions that the board should resign over the matter. “I will take responsibility as the CEO. I will go to the commission of inquiry and we will even ask for judicial review of the Public Protector report,” he said.

    He also rejected calls for Zuma and Public EnterprisesMinister Lynne Brown to resign over the report. “I also don’t think that the President should resign because we decided not to give Glencore R530/t, when we had a contract for R150/t. The President did not even know anything about it as far as I’m concerned and calls for his resignation I think are out of line – I will resign before he does.”

    Regarding his own position at Eskom, Molefe said: “I will weigh my options”. However, he added that, after agonising all Wednesday night over the report, he could not see what he would have done differently.

    A clearly angry Eskom chairperson, Dr Ben Ngubane, jumped to Molefe’s defence saying that, should Molefe resign then “Thuli Madonsela has stuck a deadly blow against Eskom and the people of South Africa. If we lose Brian she should take the blame”.

    Ngubane also described as “crazy” calls for the board to be dissolved based on the “speculation” in the Public Protector’s report.

    Molefe expressed strong displeasure with the way Madonsela had handled the investigation, arguing that he was never given an opportunity to provide Eskom’s side of the story.

    “My gripe with the whole situation is that the Public Protector never called me, or Mr Anoj Singh [Eskom CFO] to come and give our version of events. She asked for files, we gave her 120 files in 13 boxes  . . . She subpoenaed us and we had a date with her to come and explain what was happening . . . she cancelled the meeting. We never appeared in front of the Public Protector.”

    Instead, questions were sent to which Eskom responded in writing. In addition, “substantive” information on a controversial prepayment arrangement for Tegeta coal had been provided the day before Madonsela finalised the report.

    “The Public Protector has painted me with a corrupt brush. There will be a commission of inquiry established six months from now [and] we will get results maybe 18- or 24-months from now. During that period, my children will be taunted at school – your father’s corrupt, your father’s corrupt.”

    “But what pains me the most is that I never had the opportunity to explain what I am saying now to Advocate Madonsela.”
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    China seeks to improve energy structure to cut carbon emissions

    China plans to upgrade its energy structure to cut carbon emissions and reduce costs in transmission of power, Shanghai Daily learned yesterday at the green technology seminar of the China International Industry Fair.

    China National Offshore Oil Corp is developing a rig that is able to work in over 3,000-meter-deep water as deep-sea oil is expected to account for 60 percent of energies China will get from the ocean crude in the coming five years, said Zeng Hengyi, vice chief engineer of the company.

    Being able to do so would slash China's energy costs by lessening the nation's reliance on import of crude, which in September grew 18 percent year on year, making China the largest crude importer globally.

    CNOOC is also trying to use nuclear power to exploit oil sources, which would lower carbon emissions in the procedure, Zeng said.

    China also plans to develop a more scattered power station layout, which officials call a "distributed generation system," to enhance power transmission efficiency while helping more areas get access to electricity, said Yu Yixin, an academician at the Chinese Academy of Engineering.

    China has long suffered energy waste as it transmits electricity from the west, which has abundant coal, to the eastern parts of the country.

    "Although east China lacks coal, it has more wind and sunshine," Yu said. "It enables the nation to build power stations using diversified resources in more areas."

    Without the energy waste in the long-distance transmission, the "electricity utilization rate would be tripled from the conventional way," Yu said. "More areas can use the power generated locally and enjoy cheaper costs and cleaner energy."

    By 2020, it is envisaged that Chinese would pay 0.80 yuan (12 U.S. cents) for per kilowatt-hour electricity, below the 1 yuan per kWh on average presently. By 2030, the price would be below 0.60 yuan per kWh.

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    Egypt devalues currency, raises interest rates

    Egypt devalues currency, raises interest rates

    The Egyptian central bank on Thursday devalued the country's currency by 48 percent against the U.S. dollar and raised interest rates by 3 percent.

    The official exchange rate of the Egyptian pound will be 13 to the U.S. dollar, down from 8.8 to the greenback.

    The currency will be allowed to fluctuate in value by 10 percent for a short period before it is set, the central bank said in a statement.

    The bank had also raised deposit and lending interest rates by 3 percent.

    The official exchange rate for the Egyptian pound has been steady at 8.8 to the U.S. dollar since March, but the currency kept tumbling on the black market, to as low as 18 against the dollar.
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    Iraq defaults on $1 billion debt to Iran

    Iran is currently exporting some 1,500 megwatts of electricity to Iraq.

    Iraq has an outstanding debt of $1 billion to Iran related to the purchase of electricity and the two neighbors are discussing mechanisms to have it settled, an Iranian deputy energy minister says.

    Iran is currently exporting some 1,500 megawatts of electricity to Iraq, with a further capacity established to raise it to 2,000 megawatts.

    Deputy Energy Minister Houshang Falahatian said on Wednesday that Iraq now runs a debt of $1 billion related to more than one year of power purchases from Iran and other dues related to earlier years.

    Iraq had undertaken to settle the debt in 10 installments but it has fallen back on the repayments after initially fulfilling part of its commitments, he said.

    “The rise in the volume of Iraq’s debts to Iran has nothing to do with the sanctions or problems related to the transfer of money through foreign banks,” Falahatian said.

    The accumulation of the debt, the minister said, was chiefly due to the decline in Iraq’s revenues from the oil price crash.

    “Despite the rise in the volume of the debt, exports of electricity to Iraq continue,” Falahatian added.
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    The 3D printing future has arrived

    Digitalization is transforming and opening up exciting new opportunities in the power industry - no more so than additive manufacturing, commonly known as 3D printing. Tildy Bayar visits a first-of-its-kind workshop for the development, manufacturing and repair of power generation components in metal through 3D printing

    Additive manufacturing, or laser sintering, or selective laser melting - more commonly referred to as 3D printing - has the potential to effect fundamental changes in the way power plant components are designed, manufactured and distributed.

    The leading maker of 3D printing equipment, EOS e-Manufacturing Solutions, notes that 'additive manufacturing' is the most accurate term, contrasting it with traditional manufacturing techniques which it calls 'material removal' (and which thus might be thought of as 'subtractive manufacturing').

    Rather than beginning with a solid block of plastic or metal and hewing a shape from it, or welding different subcomponents together, as in traditional techniques, additive manufacturing builds components from scratch through the application of many micro-thin layers of powderized material, applied sequentially and melted together with a precision laser. These materials can be plastics, metals or composites.

    While the technique has been in use for 10 years for rapid prototyping purposes in metal, it is now being increasingly used in serial production, where it is already proving transformative. On a recent trip to Siemens' new additive manufacturing facility in Finspang, Sweden, the technology and, perhaps, the future of power plant component production was on display.

    From dreams to reality

    Siemens' Industrial Turbomachinery facility in Finspang is one of three additive manufacturing 'hubs' the company maintains, with an existing facility in Berlin and another in the works in the UK, at the headquarters of recently-acquired advanced manufacturing firm Material Solutions. The Finspang facility has been a turbine manufacturing plant since 1913 and had a number of owners, including ABB, before being acquired by Siemens in 2003. It now produces and packages the company's SGT-500, SGT-600, SGT-700, SGT-750 and SGT-800 model industrial gas turbines, as well as the Industrial Trent (up to 66 MW) aero-derivative gas turbine.

    The additive manufacturing department was added to the facility in 2009 and officially opened this year. It features a number of EOS 3D printers which work in conjunction with a proprietary computer-aided design (CAD) program. The first piece printed through its process was a model in metal of the company's local headquarters, Finspang House.

    As Thorbjoern Fors, CEO of the company's Distributed Generation Services business, puts it, the department's focus is driven by the idea that "if you can dream it, you can print it". He says the technology and innovations 3D printing can give rise to could transform both production and service, enabling the manufacturing process to become design-driven and allowing for almost unlimited innovation in design, materials and structures, while also simplifying and speeding up repairs.

    In addition, Dr Vladimir Navrotsky, CTO of the Distributed Generation Services business and Siemens' Innovator of the Year for 2015, notes that "with this technology there is no scale effect - we could make one component or 1000 and the cost would be the same, unlike classical production where bigger volume equals lower cost."

    Transforming service

    According to Navrotsky, additive manufacturing offers a number of benefits for the component repair process, including reduced lead time, fewer process steps (for example, no casting is involved), savings on materials, elimination of tools, and on-demand (or "instant decentralized") production.

    In a 2013 example of a repair undertaken through additive manufacturing, the first commercial product produced by the Finspang facility was a spare part, a burner tip for the SGT-800 turbine. Rather than manufacturing a new head, the old head was cut off, and a new head was printed directly onto the burner instead of needing to be welded on.

    An SGT-1000F turbine at a gas-fired power plant in Brno in the Czech Republic has been running since June with 3D printed spare parts. During the last scheduled inspection, three of its 24 burners were equipped with Siemens' first printed burner heads.

    "This is the first time this spare-part-on-demand process was ever done," says Fors, adding that in the traditional process, re-manufacturing the burner head alone would have taken six months; with additive manufacturing, the entire process was accomplished in a few weeks.

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    Impact of EV's, oil vs copper

    BNEF wasn’t alone in seeing a turning point in EV sales growth this year—Wood Mackenzie, the International Energy Agency, and many others see the EV market trending upward quickly enough to destabilize oil demand, especially with the continued implementation of supportive policies.

    But yesterday, mining giant BHP Billiton published an analysis arguing that EVs could have big impacts on markets for aluminum, lithium, nickel, manganese, cobalt, and particularly copper that dwarf the oil market fallout. Billiton notes that an EV requires four times as much copper as an internal combustion car. In its estimate, 140 million

    EVs on the road around the world would displace about 2 million barrels per day of oil and create a net increase of 8.5 million tons of copper demand. This demand increase would be worth about a third of total global copper demand—some $38 billion out of a $100 billion annual market. By comparison, that same number of EVs would displace about 2 million barrels per day, $37 billion worth of oil annually out of a $1.8 trillion market.

    BHP Billiton estimates that 140 million EVs on the road around the world would displace about 2 million barrels per day of oil and create a net increase of 8.5 million tons of copper demand.

    Of course, Billiton’s projections favor its position as a mining conglomerate. Moreover, the impact of developments such as autonomous technology and shared-mobility business models will change how cars are owned and used in ways that can’t currently be projected.

    But the disproportionate impact that EVs are likely to have on copper versus oil markets is sure to be a dynamic to watch in the coming years, as the same number of electric cars that would displace 2-3 percent of the global oil market would boost the world’s copper demand by one-third. Copper markets could be sent reeling with knock-on effects for other metals and global commodities, which are known to operate in boom-bust cycles thanks to long lag periods between upstream investment and actual production.

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    Jailed ex-Brazil Congress leader may not get to tell all

    He was already among the most reviled politicians in Brazil and now he is among the most feared.

    Eduardo Cunha, the former speaker of the lower house of Congress who led the impeachment of a president while at the same time being accused of graft, was arrested two weeks ago on multiple corruption charges.

    Speculation is rife he could take down hundreds of congressmen with him if he turns state's witness, leading local media to label him as a "suicide bomber" loaded with secrets which could implicate legions of legislators.

    But there is just one catch: investigators and prosecutors say they would rather see Cunha, accused of taking at least $6.5 million in bribes, imprisoned for the longest time possible if he is found guilty. They only want to cut a plea bargain deal with him if he really offers proof against leaders at the highest level or on an extraordinary number of politicians.

    Cunha is one of the highest-profile targets of "Operation Car Wash," a far-reaching investigation that centers on bribes and political kickbacks from contracts with state-run oil company Petroleo Brasileiro SA, or Petrobras. So far nearly 200 people have been charged in the case.

    "Everybody wants us to sign a deal with Cunha, including newspaper columnists and editorials basically saying we have an obligation to do so," Carlos Lima, a lead prosecutor in the probe, told Reuters recently from his office in the southern city of Curitiba, where the investigation is centered.

    "But I'm not going to trade Cunha for anybody less powerful than he was, unless he comes and offers up some 200 deputies (legislators) that were beneath him. Then perhaps it is possible."

    Two other officials directly involved with the Petrobras probe agreed with that thinking.

    They said that unless Cunha is able to provide evidence against senior ministers to President Michel Temer, or against the president himself, it is unlikely they would be willing to negotiate any plea bargain with Cunha, given the amount of bribes and wide-ranging graft he stands accused of committing.

    "The moral cost of cutting a deal with Cunha would be enormous," said one source.

    Another emphasized it would be difficult to reach a plea bargain with Cunha because they think he would only name certain politicians out of vengeance for either kicking him out of office or for somehow not protecting him from the Petrobras investigation.

    "Cunha seems more like an extortionist of businesses, and with that money he sustained his own personal caucus in Congress," another source said. "I would have to be convinced he is telling the truth, that he is not hiding crimes of those loyal to him while trying to expose those who 'crossed' him. That gets complicated to sort out."

    Marlus Arns, a Curitiba-based lawyer representing Cunha, did not respond to requests for comment about any possible plea bargain or charges against him.

    Prosecutors also charged Cunha's wife, Claudia, in the case for alleged money laundering. That heightened expectations Cunha would press hard to be accepted as a state's witness and implicate a huge swath of the political establishment.

    That he would sing to prosecutors is the hope of many Brazilians, who have watched with intense satisfaction as some of the nation's most well-known businessmen and political figures have fallen in a country where the powerful enjoyed impunity for corruption and other crimes for centuries.

    "I understand that reasoning, I really do," said the prosecutor Lima. "But it is a question of whether Cunha can offer proof against somebody above him, and I am not certain that he can."

    Polls showed that Brazilians overwhelmingly supported Cunha's expulsion from Congress in September on grounds that he lied about secret bank accounts in Switzerland.


    In February 2015, Cunha, a member of Temer's Brazilian Democratic Movement Party (PMDB) that for a decade was the main member of the long-ruling Workers Party (PT) governments, defied the wishes of his own coalition to run for and win the speakership of the lower house of Congress.

    Just six months later, he officially had broken with the PT government of former president Dilma Rousseff, saying that she was using the Petrobras investigation as a tool of "political persecution" against him.

    As speaker, only Cunha could allow impeachment proceedings to begin against Rousseff, whom critics accused of breaking budgetary laws. He did just that in early December 2015, just hours after PT deputies cast deciding votes for Cunha to face an internal investigation before the House's ethics committee.

    By May of this year, Rousseff was impeached and her Vice-President Temer installed as successor. But Cunha could not shake free of corruption allegations.

    Temer distanced himself from Cunha and refused to throw him political lifelines, leading to the now constant speculation that Cunha will pull all possible PMDB skeletons out of the closet should he be granted a plea bargain.

    Cunha himself, just after the vote that kicked him out of Congress, told journalists that "those who turn state's witness are criminals, and I am not a criminal."

    But that was before his case was ordered by Brazil's Supreme Court to be sent to anti-corruption Judge Sergio Moro in Curitiba, the magistrate leading the Petrobras probe.

    Moro has a reputation for moving through cases swiftly, handing down harsh sentences and of not having his decisions reversed on appeal.

    Of the 84 people found guilty in the "Car Wash" probe by Moro, just one had his conviction overturned by a higher court - a 99-percent conviction rate, a statistic those who face him know all too well.

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    Now its a fight!

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    China official PMI reaches 51.2 in Oct

    The official Purchasing Managers' Index (PMI) rose to 51.2 in October, above the 50-point mark that separates growth from contraction on a monthly basis, compared with the reading of 50.4 last month, jointly announced by National Bureau of Statistics (NBS) and China Federation of Logistics & Purchasing (CFLP) in a statement on November 1.

    It indicated a robust strengthening of activity in China's manufacturing sector in October, and China's economy is stabilizing.

    A sub-index for small and medium-sized firms fell to 49.9 and 48.3, compared with 48.2 and 46.1 in September, while performance at large companies slightly fell to 52.5 compared with 52.6 last month.

    Factory output increased to 53.3 in October from 52.8 in September, and total new orders stood at 52.8, notably rising from September's 50.9, the PMI showed.

    The employment sub-index rose to 48.8, compared to 48.6 in September, signaling a slightly slower contraction of labors in manufacturing enterprises.

    Separately, the private Caixin/Markit purchasing managers' index released on the same day showed factory activity increased to 51.2 in October from September's 50.1.

    The official survey looks more at larger, state-owned firms, while the Caixin survey focuses on smaller firms.
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    China Hongquiao ordered to close half production: Aluminium BULL!

    China Hongqiao, which usurped state-backed Aluminium Corporation of China and Russian oligarch Oleg Deripaska-controlled Rusal in the space of two years to become the world’s largest aluminium smelter last year, has run afoul of Chinese environmental regulations on over half of its capacity.

    Shandong province-based Hongqiao, 81 per cent-owned by tycoon Zhang Shiping, has been ordered by the environmental protection watchdog of Zhouping county of Binzhou city, where its facilities are located, to cease production at production lines with combined annual capacity of 3.61 million tonnes.

    The reason given for the penalty was “failure to obtain environmental protection approvals before building and operating the facilities”.

    The firm was also ordered to stop construction of a 1.32 million tonne-a-year smelting plant, the watchdog said, citing Hongqiao’s failure to seek new environmental impact assessment approval before making major changes to a downstream processing plant.

    It was separately told to cease construction of a power plant with 4,800 mega-watts of generating capacity, shut down a 1,320 MW power-and-heat co-generation plant and an alumina refinery, due to failures to obtain environmental approvals.

    Alumina is the raw material of aluminium, and is refined from the mineral bauxite.

    These actions are according to 11 penalty announcements posted by the bureau on the county government’s website between May 27 and September 23, which said the company is also liable to unspecified fines.

    The company expanded its smelting capacity by 29.8 per cent to 5.89 million tonnes in the 12 months to June 30, and chief executive Zhang Bo told reporters in August that it plans to further expand it to 6.5 million tonnes by the end of the year.

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    China's power use to rise 2.5% in 2016, CEC

    China's power consumption is forecast to rise some 2.5% year on year in 2016, said an official from the China Electricity Council (CEC), on an industry summit held on October 28.

    Electricity supply will remain sufficient in China on the whole during the same period, with surplus in some areas, said Cai Yiqing, deputy chief engineer of CEC, at 2016 the 4th Global Thermal Coal Resource & Market Summit organized by China Coal Resource.

    The country's installed capacity of power generation will gain 7.8% to 1.64 TW by the end of 2016 from 1.51 TW last year, with newly-added capacity exceeding 100 GW, he said.

    The utilization hour of electricity generation units is expected to fall to 3,700 hours in the second half of this year, with that of thermal power units down to 4,050 hours or so.

    China is picking up pace in lowering carbon emissions while seeking to power grid connection with other countries. Cai predicted the country's non-fossil energies will climb to 15% of the total energy consumption over 2016-2020, while coal burns will drop drastically.  

    Member countries of the Organization for Economic Cooperation and Development (OECD) have seen natural gas contributing over 30% of their primary energy consumption, and their renewable energies and nuclear power are also booming, according to Cai.

    The power sector has been allowed to be preliminarily open to the market, to enhance utilization efficiency and optimize allocation of energy sources. However, specific market rules and supervision should be worked out to ensure healthy development of the industry, Cai stated.

    Meanwhile, difficulties ahead are far more than expected – surplus capacity of fossil fuels, bottleneck of renewables, tough task of clean energy substitution and inefficient power generation system. The central government will take measures to tackle them, Cai pointed out.

    China will also put hydropower generation in the first priority, and vigorously develop nuclear and natural gas based power generation.

    The green and clean development of coal-based power generation will still be important in the future, as coal is expected to continue to dominate China's energy mix in the long term.

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    UK's First automated grid capacity warning triggered

    The new automated Capacity Market notices are a signal four hours in advance that there may be less generation available than the grid operator expects to meet national power demand – when extra headroom is forecast to fall below 500MW.

    They are intended to be a signal that the risk of a ‘System Stress Event’ in the electricity network is higher than under normal circumstances.

    Today, the grid warned there could be insufficient electricity production supply to meet the UK’s demand at 4.30pm.

    It said demand was likely to be 44.26MW while supply would be 44.49MW.

    In response, around 800MW of demand reduction and onsite generation capacity was prepared to fill the gap.

    The news comes as the nation moves back to GMT, when people are expected to use more power.

    National Grid said the notice does not indicate there is a supply problem.

    A spokesperson added: “Capacity Market Notices are automated and based on the data industry has submitted.

    “They are not an indication of supply problems but to flag that the trigger level set by government under the Capacity Market rules (500MW above expected demand and NG’s operating margin) has been breached. The notice serves as a reminder to Capacity Market participants to pay attention to any system notices or instructions that may appear from the system operator.”

    Earlier this month, National Grid increased the gap between total power generating capacity and peak demand to 6.6% for this winter.

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    South African Rand Jumps After Fraud Charges Against Finance Minister

    South Africa’s currency jumped on Monday after the country’s national prosecutor dropped fraud charges against Finance Minister Pravin Gordhan, the latest chapter in a drawn-out battle for control of the ruling African National Congress that has rattled markets in Africa’s most developed economy.

    National Prosecuting Authority chief Sean Abrahams announced in a news conference in Pretoria that charges against Mr. Gordhan would be dropped because there was no intention to act unlawfully.

    Mr. Gordhan, a respected treasury chief and veteran of the antiapartheid struggle, was due to be prosecuted on Wednesday for approving a generous early-retirement deal for a former senior official in the South African Revenue Service.

    “I am satisfied that Mr. Gordhan didn’t have the requisite intention to act unlawfully,” Mr. Abrahams said at the end of a long press conference laced with obscure case law. “As such, I have directed the summons to be withdrawn with immediate effect,”

    The rand jumped about 1.4% to 13.625 to the dollar, its highest level in almost a month. Yields on South Africa’s 10-year bond fell to 8.710%, down from Friday’s close of 8.875%. Yields had hit 8.925% on Thursday, the highest since Oct. 12 and close to September-highs, according to Thomson Reuters data.

    The dropping of the charges represents the latest chapter of a turf war between Mr. Gordhan and President Jacob Zuma over government spending and the direction of the ANC, which has governed South Africa since the end of white-minority rule in 1994. Allies of Mr. Zuma, whose second term in office ends in 2019, have openly fought with Mr. Gordhan over control of state finances, including the running of state-owned enterprises, anticorruption agencies and the central bank. Ratings firms have warned that political infighting could lead to South African bonds being downgraded to junk status.

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    Bitcoin price breaches $700 on the upside

    The average price of Bitcoin across all exchanges is 711.17 USD

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    IT error in India causes shut-down of production at Statoil refinery… Norway

    Production at Statoil’s Mongstad Refinery was reportedly halted due to an IT error in India, new documents have revealed.

    The Norwegian operator’s computer systems are outsourced to a company after the responsibilities were passed on in 2012.

    According to Norwegian media, evidence has been uncovered which shows 29 incidents where Indian IT workers have broken down barriers to platform.

    Amongst some of the incidents, an IT worker is said to have stopped production at the Mongstad refinery in 2014 because of a typing error.

    Earlier this week staff were called to muster at the Mongstad refinery after a suspected incident.
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    France Might Have Blackouts This Winter?

    At present, 21 of France’s 58 nuclear reactors are offline. The country’s power prices have skyrocketed, as have imports. Power from fossil fuel is increasing, and the country has now postponed its plans to implement a floor price on carbon. Craig Morris explains why.

    “Nuclear doesn’t need coal as a backup like renewables do in Germany,” reads one comment meme. The reading is already silly: Germany backs up renewables with coal because it has cheap coal; if it had gas (or hydro), it would back them up with that. But now, news from France indicates that the model country for nuclear is itself slipping back into fossil.

    In September, the French generated more power from fossil fuel than in any September since 1984, according to Bloomberg. Back then, the news would have surprised France; after all, the government planned to build 170 reactors by 2000 and become fully nuclear for all energy (not just electricity). It never got far beyond 40 percent nuclear and now aims to reduce the share of nuclear in the power sector from 75 to 50 percent by 2025.

    The focus on September is important because monthly power consumption swings with the seasons. It rises as cold weather sets in, mainly due to demand for heat from electricity and for lighting. So the question is whether France is switching more to fossil fuels—and why.

    The short answer is: it can’t switch. France only has 2.9 GW of coal-fired capacity left. And it takes years to build new coal plants (which, it should be remembered, no one has proposed). What’s more, Uniper (a German firm, formerly Eon) says it will close down its coal facilities in France if the country adopts a floor price for carbon like the UK has (strangely, the firm is still in the UK). Nonetheless, this threat and others from industry is one reason why the French government backed down from a proposed carbon floor price in October. But clearly, France won’t return to coal, which it does not have.

    But why the dip in nuclear? The ASN, which regulates French nuclear reactors, is becoming a fierce watchdog. In mid-October, it demanded the closure of five of the eighteen reactors it is investigating based on safety reasons. A total of 21 reactors are now offline, and the French are starting to worry about power outages in the winter, with the head of French utility EDF (which operates all of the reactors) saying at least four but possibly up to twelve units will not be available this winter.

    France may not be able to import enough electricity in case of a shortfall, either. Back in February 2012 (yes, the winter after Fukushima, when many claimed Germany would rely on its nuclear neighbors), power lines from Germany to France were maxed out. Germany saved France from an outage then, and there was no shortfall in French nuclear power production at the time. A bitter cold spell would indeed be challenging.

    Prices on the power exchange are already greatly diverging. French prices are roughly 50% above those in Germany on the day this post was written, and German/Austrian prices remain the lowest in the comparison.
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    Venezuela court annuls Congress probe of $11 billion missing at PDVSA

    Venezuela's top court on Thursday approved an injunction against a congressional probe that found Rafael Ramirez, the former president of state oil company PDVSA, was responsible for corruption and malfeasance that cost the firm $11 billion.

    A congressional commission this month said the funds had gone missing during Ramirez's time in charge, from 2004 to 2014, citing 11 cases of alleged corruption including overpricing of drilling rigs and a scandal over money laundering through an Andorra bank.

    Ramirez, who denies the charges, had requested an injunction from the Supreme Court to block the investigation. Opposition leaders in Congress had said they could use the probe to hold him politically responsible or take legal action against him.

    A summary of the decision posted on the court's website said the injunction request had been granted. Ramirez, contacted by Reuters, confirmed the decision.

    The report also accused other top executives including the company's current president, Eulogio Del Pino, of corruption.

    PDVSA has been at the center of a number of corruption scandals over the years, the most recent case involving a group of Houston-based businessmen who pleaded guilty in the United States to running a $1 billion kickback scheme to obtain contracts.

    Last year, financial authorities in Andorra intervened in a small bank called BPA following an accusation by the United States that it was linked to billions of dollars in laundered funds including money illegally taken from PDVSA.

    Switzerland has given around $51 million in formerly frozen assets to the United States in connection with a U.S. investigation into alleged corruption at PDVSA, the country's authorities said on Tuesday.

    Venezuela's opposition in December won a majority of seats in parliament and immediately began efforts to document corruption under the ruling Socialist Party.

    The Supreme Court since then has repeatedly sided with the executive branch in its disputes with the legislature.
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    Long term rates made a Kondratiev cycle low this year?

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    President Trump a la Brexit

    Micheal Moore.

    Paglia says she has absolutely no idea how the election will go: ‘But people want change and they’re sick of the establishment — so you get this great popular surge, like you had one as well… This idea that Trump represents such a threat to western civilisation — it’s often predicted about presidents and nothing ever happens — yet if Trump wins it will be an amazing moment of change because it would destroy the power structure of the Republican party, the power structure of the Democratic party and destroy the power of the media. It would be an incredible release of energy… at a moment of international tension and crisis.

    Gold Pops Higher on News of Clinton Investigation

    The precious metal is a popular safe haven during political or economic turbulence

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    Oil and Gas

    After curtailing production, Continental to complete 29 Bakken wells

    Continental Resources' Bakken production averaged nearly 108,000 b/d of oil equivalent in the third quarter of 2016, down 14% or more than 17,000 boe/d from the previous quarter, but the Oklahoma City-based producer plans to boost production in its North Dakota and Montana plays before the end of the year.

    "We've begun harvesting our valuable Bakken inventories," Harold Hamm, Continental's chairman and CEO, said during an earnings call Thursday.

    Continental plans to complete 29 gross operated wells in the Bakken, nine more than it planned at the end of Q2, and will double its stimulation crews in the play to four by the end of the year, the company said Thursday.

    Continental plans to stimulate another 15 Bakken wells this year, but first sales are not expected until 2017. It expects to end the year with about 175 gross operated uncompleted wells in the Bakken.

    Hamm said the focus was entirely on completing wells in that inventory and said his company would not be adding any new rigs. Continental currently operates four rigs in the Bakken.

    Continental expects Bakken production to average over 124,100 boe/d this year, down from nearly 137,400 boe/d in 2015.

    Continental's announced plans for the Bakken come as North Dakota has seen its oil production dip below 1 million b/d for the first time since March 2014. The drop in supply came as producers like Continental restricted production amid persistently low crude oil prices.

    North Dakota's Department of Mineral Resources reported last month that statewide oil production averaged 981,039 b/d in August, down 49,000 from July. The state agency plans to announce September production statistics next week.

    In its Q3 results, Continental said it had curtailed Bakken production by about 12,000 net boe/d during August and September "due to lower commodity prices," but said production was brought back online by the end of the quarter.

    Continental's total production averaged nearly 208,000 boe/d, down from about 219,000 boe/d in Q2 and 228,000 boe/d in Q3 2015. Continental expects production will average 215,000-220,000 boe/d this year, up 5,000 boe/d from last quarter's low-end guidance and up 15,000-20,000 boe/d from guidance at the beginning of the year.

    Production guidance has increased as the company said production expenses had dropped 25 cents to $3.50-$4/boe and the company raised anticipated capital expenditures for 2016 from $920 million, which it said in August it expected to spend this year, to $1.1 billion.

    Continental said production in its SCOOP play averaged over 67,400 boe/d in Q3, up from nearly 64,700 boe/d in Q2 and down from more than 69,100 boe/d in Q3 2015.

    Production in Continental's STACK/Northwest Cana play climbed to nearly 17,700 boe/d in Q3, up from more than 14,600 boe/d in Q2 and more than 6,600 boe/d in Q3 2015.
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    Cheniere narrows losses, plans mid-scale LNG project

    Cheniere Energy posted a third-quarter net loss of US$100.4 million for the three months ended September 30, 2016, compared to a net loss of $297.8 million for the comparable 2015 period.

    The Houston-based company reported third quarter revenue of $465.7 million compared to $66 million in the corresponding period in 2015.

    Speaking of the third quarter, Cheniere’s president and CEO Jack Fusco said the company’s transition to operations continues as Train 2 at Sabine Pass liquefaction project reached substantial completion and the commissioning of Train 3 began.

    The company noted in its report on Thursday that the construction of Sabine Pass trains 3 and 4 is 91.8 percent complete and ahead of contractual schedule, with substantial completion expected in 2017. Train 5 was approximately 42.8 percent complete.

    Cheniere said that the outage to improve the flare systems at Sabine Pass, as well as to perform scheduled maintenance to Train 1 and other facilities, was completed.

    At its Corpus Christi LNG export terminal the construction of Trains 1 and 2 is approximately 43 percent complete with completion expected in 2019, with Train 3 under development and expected to begin construction once more LNG sale and purchase agreements are signed.

    Cheniere eyes mid-scale modular liquefaction project

    The LNG exporter said in its report that it is exploring the development of a mid-scale liquefaction project.

    The project would be developed using electric drive modular trains, with an expected aggregate nominal production capacity of approximately 9.5 mtpa of LNG.

    Cheniere has completed a competitive bidding process and awarded a front-end engineering and design contract to a consortium consisting of KBR, Siemens, and Chart Industries.
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    Apache Corp. cuts expenses, narrows losses to $607 million

    A drilling rig sits north of the Davis Mountains Friday, Sept. 16, 2016 in Balmorhea. Houston-based Apache Corporation recently announced the discovery of an estimated 15 billion barrels of oil and gas in the area and plans to drill and use hydraulic fracturing on the 350,000 acres surrounding the town. ( Michael Ciaglo / Houston Chronicle )

    Houston’s Apache Corp., one of the largest oil and gas companies in the U.S., narrowed losses in the third quarter thanks largely to the increase in oil prices.

    Apache reported on Thursday losses of $607 million, 85 percent or $3.5 billion better than losses in the third quarter last year. The company posted $1.60 in losses per share, in comparison to $10.95 in losses per share over the same period last year.

    Revenues dipped 6 percent or $88 million to $1.4 billion. Expenses fell dramatically: Apache cut 60 percent or $3.6 billion to end the quarter spending $2.3 billion, largely because it did not have to write down oil reserves.

    Oil production fell 7 percent or 20,000 barrels per day to 271,000 barrels per day. Gas production fell 8 percent or 90 million cubic feet per day to 1.1 trillion cubic feet per day. Total production, including natural gas liquids, fell 6 percent or 30,000 barrels of oil equivalent per day to 520,000 barrels of oil equivalent per day.

    Apache was upbeat on its future.

    The company highlighted its discovery of Alpine High, a new oilfield in the Delaware Basin, the western section of West Texas’s Permian Basin. It said it planned to add three rigs this quarter in the Midland Basin, the Permian’s eastern lobe. And it anticipated 2016 oil and gas production would meet or crest expectations.

    Apache chief executive John Christmann said a “transformation” is taking place at the company, with a “strategic focus on organic growth and strong technical capabilities.”

    Christmann said Apache would develop Alpine High “in a methodical, efficient and environmentally responsible way.”

    “Our economic drilling inventory in the Permian Basin is more extensive today than at any time in the company’s history, and we expect it will continue to grow as we further delineate our vast acreage position in the basin,” Christmann said.
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    EOG Resources posts smaller quarterly loss

    As have many oil companies, EOG Resources dramatically cut losses in the third quarter. The Houston-based oil exploration firm also said on Thursday that it was doubling the amount of oil and gas it thought it could recover from West Texas’s prolific Permian Basin.

    EOG reported a third quarter net loss of $190 million, or 35 cents per share, $3.9 billion better than its performance over the same period last year. In the third quarter of 2015, EOG posted a net loss of $4.1 billion, or $7.47 per share.

    Revenues dipped by 2 percent or $50 million to $2.2 billion over the third quarter last year. Expenses fell by more than $6 billion, to $2.3 billion. Last year, EOG wrote down more than $6 billion in oil inventory losses after the crude price crash.

    The dip in income last quarter came from the continuing fall in crude oil and natural gas prices, EOG reported, despite “significant well productivity improvements and lease and well cost reductions.”

    The company pumped 275,700 barrels of oil per day in the quarter, at the upper end of its expectations. Lease and well expenses, meanwhile, decreased 18 percent over the same period last year.

    Chairman and Chief Executive Bill Thomas lauded the company’s $2.34 billion purchase of Yates Petroleum in the quarter and called 2016 a “breakout year” for EOG, despite the oil price crash.

    With the addition of Yates acreage, EOG more than doubled its total oil and gas recovery estimates in the Permian’s Delaware Basin from 2.35 billion barrels of oil and gas to 6 billion.

    Long term, the company expects growth from its wells in south Texas’s Eagle Ford, west Texas’s Delaware Basin, the Colorado Rockies and North Dakot’s Bakken.

    Assuming $50 oil, EOG said it expects 15 percent annual oil production growth through 2020.

    “EOG’s future has never been brighter,” Thomas said in a statement.
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    Kurds Reveal Oil Data as Iraq Output Row Threatens OPEC Deal

    Iraq’s Kurds say their oil production in September was 290,000 barrels a day lower than the federal government’s figures for the semi-autonomous region, as OPEC’s second-biggest member tries to resolve accounting differences with the producer group over its output.

    Iraq’s central government says its crude oil output is several hundred thousand barrels a day higher than market analysts and the Organization of Petroleum Exporting Countries acknowledge. It published a rare breakdown of its September production data this week to support its figures. The disagreement over the figures, which would determine the size of any cuts by OPEC members, threatens to derail talks to limit the group’s output.

    Fields operated by the Kurdistan Regional Government produced an average of 531,000 barrels a day in September, Michael Howard, an adviser to the Kurdish minister of natural resources, said in an e-mail on Thursday. That number includes production from the Kurdish-controlled Bai Hassan and Avana fields in Kirkuk province, he said.

    Iraq’s state-run Oil Marketing Co., known as SOMO, put Kurdish production in September at 546,000 barrels a day. It counted Bai Hassan and Avana separately, adding a further 275,000 barrels a day to the total and creating a 290,000 barrel discrepancy with the KRG’s numbers.

    Double Counting

    “SOMO has been double counting those key fields,” Richard Mallinson, a London-based analyst at Energy Aspects Ltd., said by phone. “It will be quite difficult for them to continue to stand by the total figures they’ve been giving.”

    Consultants Petro-Logistics and FGE also said this week that the federal Oil Ministry was “double-counting” some fields in the region.

    Iraqi Oil Ministry and SOMO officials weren’t immediately available to comment. Deputy Oil Minister Fayyad Al-Nima said on Oct. 23 that the Kurdish authorities were producing more than they acknowledged, when asked at a briefing in Baghdad about the possibility of double counting.

    Kurdish armed forces took control of Bai Hassan and Avana in July 2014, as Islamic State militants seized large swathes of territory in northern Iraq. The federal government doesn’t recognize Kurdish control of the fields, and says they belong to the North Oil Co., a unit of the Oil Ministry.

    SOMO data show Iraq’s total production averaged 4.774 million barrels a day in September. Oil companies, analysts and ship-tracking data surveyed by Bloomberg gave an average estimate of 4.54 million barrels a day for the same month. OPEC put Iraq’s September production at 4.455 million barrels a day.

    Iraqi Oil Minister Jabbar al-Luaibi complained about OPEC data at a meeting in September in Algiers. OPEC assesses output for its 14 members based on data from oil-industry watchers. Iraq wants the group to accept the ministry’s figures before a Nov. 30 meeting at which OPEC could finalize details of the Algiers accord to limit its production.
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    Saudi Aramco Increases Oil Pricing to Asia on Rise in Demand

    Saudi Aramco Increases Oil Pricing to Asia on Rise in Demand

    Saudi Arabia, the world’s largest crude exporter, raised pricing for December sales of all oil grades to Asia as it tries to take advantage of a brief increase in demand for Middle Eastern crude.

    State-owned Saudi Arabian Oil Co., known as Saudi Aramco, increased its pricing for Arab Light crude to Asia by 90 cents a barrel, to a premium of 45 cents over the regional benchmark. The company had been expected to raise pricing for shipments of Arab Light by 85 cents a barrel, according to the median estimate of six refiners and traders in the region polled by Bloomberg.

    Saudi Aramco also raised the pricing of all grades to northwest Europe, and all grades to the Mediterranean except Arab Heavy, which it left unchanged. It cut pricing of the Arab Heavy grade to the U.S. by 40 cents, and left the other grades unchanged.

    The increase in Asian pricing was probably intended to take advantage of a backwardation in the Oman/Dubai benchmark price, where near-term prices are higher than longer-term futures prices, Edward Bell, a commodities analyst at Emirates NBD PJSC, said by phone from Dubai. “Generally that’s a reflection of a tighter market now than is expected two or three months down the line,” he said.

    Record Output

    Oil has gained about a quarter this year amid efforts by OPEC to limit production to reduce a global supply glut, which contributed to a drop in crude prices to about half their 2014 levels. Saudi Arabia boosted output to a record in July. Two months later, the Organization of Petroleum Exporting Countries ended a two-year, Saudi-led policy of letting members pump as much as possible to push higher-cost producers out of the market. OPEC aims at a Nov. 30 meeting in Vienna to allocate production quotas to its individual members.

    Supply and demand will be in balance by the end of this year, helping to push prices higher in the first half of 2017, Amin Nasser, Aramco’s chief executive officer, said on Nov. 1 at a conference in Riyadh. Demand is set to grow on average by about 1.2 million barrels a day this year and next, Nasser said.

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

    Lower-than-expected third quarter production was caused by several factors including higher than anticipated ethane rejection, which accounted for seven MMcfe per day, and the timing of new well completions and subsequent production as well as production shut in during completion operations (13 MMcfe per day).  
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    War of words over whether LNG as a ship fuel is greener than low-sulphur oil

    Liquefied natural gas (LNG) as a fuel-type presents a false dawn in shipping’s attempt to reduce its greenhouse gas emissions, according to Ian Adams, chief executive of the Association of Bulk Terminal Operators.

    Following media reports claiming LNG has the potential to reduce industry CO2 emissions by 75%, Mr Adams said that, while this may be true, it should not be promoted as “the solution” to reducing levels of greenhouse gasses (GHGs) in shipping.

    “It is well documented that LNG is an excellent solution for reducing sulphur and nitrogen oxides. However, I am dismayed to see it promoted as a solution for reducing GHGs,” he said.

    Citing the fifth assessment report of the UN’s intergovernmental panel on climate change, Mr Adams said that in its unburned state, LNG is predominately methane, which itself is widely recognised as a GHG, with a global warming potential of 28 over 100 years compared with CO2’s base-reading of one.

    That figure vastly increases over a shorter period – the European Commission’s Science for Environment Policy claims that methane becomes 84 times more harmful than CO2 over an 80-year period.

    The danger from LNG, Mr Adams said, came not when the fuel was burned – creating a natural gas with a reduced CO2 level – but through leaks prior to burning. When these occur, the fuel does not remain in a liquid state but rather dissipates into the atmosphere as methane gas.

    Mr Adams told The Loadstar that a 4% leak – or “slip” as he termed it – of something 25 times more harmful was equivalent to the environmental impact of all the CO2 produced when burning fuel oil.

    “If we, rather generously, accept that burning LNG will reduce CO2 emissions by 20% over the current level, it would require less than 1% slippage for there to be no gain from a GHG perspective,” he explained.

    “Taken over the entire supply chain, 1% is not an unrealistic slip. Unfortunately, the LNG myth has progressed unchecked, with very few challenging those lobbying for a wider take-up of LNG.”

    However, Simon Bennett, director policy and external relations at the International Chamber of Shipping, argued that more modern engine types meant this had become less of an issue than previously.

    “While concern about slippage is a valid issue; there is consensus at IMO [International Maritime Organization] and among engine manufacturers that developments in modern engine technology specifically designed to burn LNG mean it’s no longer the great concern it was 10 or 15 years ago. Any slippage with the latest engines would be very small and far out weighed by the environmental benefits,” he said.

    Some proponents of the fuel have even cited the way it dissipates as an additional benefit, compared to the oil spills that come with heavy fuel leaks.

    However, Mr Adams told The Loadstar that when released, LNG doesn’t have the potential for visible harm that fuel oil does, in terms of the swathes of sticky sludge harming birds and marine creatures.

    “But it does release GHGs into the atmosphere. It therefore depends on your definition of cleaner energy,” he said.

    Mr Bennett added that it was also important to consider its benefits in terms of other emission types.

    “While LNG is no panacea, the low-sulphur health benefits are significant, and we certainly view LNG as part of the interim solution for reducing CO2 – until some new technology or fuel comes along, hopefully in the second half of the century.”
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    Rice Energy 3Q16: Everything’s Up (That Should Be)

    Yesterday one of our favorite drillers in both the Utica and Marcellus, Rice Energy, released their third quarter 2016 update.

    It can be summarized in one, short phrase: “Everything that should be up is up.”

    Production is up for the quarter–by a big 23%. Net income is up, by 40%. The company’s line of credit is up to $1 billion (was $875 million).

     In addition, during 3Q16 Rice floated new stock to help them buy Vantage Energy, for a whopping $2.7 billion.

    Also during 3Q16 Rice drilled and completed 10 new Marcellus wells, along with drilling and completing 2 Utica wells. In addition they brought another 11 Utica wells online.

    There’s lots happening at Rice Energy.
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    Panda Power Raises $710M to Fund 3rd Marcellus Power Plant

    Last week saw a flurry of activity for the official ribbon-cutting at Panda Power’s very first built-from-scratch Marcellus gas-powered electric plant going online in Bradford County. 

    We were so distracted with that momentous event, we almost missed another important Panda announcement: Panda finished securing $710 million worth of investments to fund its third Marcellus gas-fired plant–a huge plant (bigger than Panda Liberty), located in Snyder County, PA.

    We previously wrote about “Panda Hummel,” a 1,124 megawatt power station that will convert a former coal-fired plant to burn natural gas . Hummel will generate enough electricity to power 1 million homes! You can have all the great plans and ideas in the world, but they don’t get built without money. Panda has now raised the money to build Hummel, by selling debt to do it…

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    The record build that never was

    Yesterday’s weekly EIA inventory report showed a 14.4 million-barrel build to oil inventories, the largest since weekly records began in 1982.

    Here at ClipperData, we use U.S. Customs bills to report oil imports in a timely fashion. Imports play a key role in the weekly inventory data, making a major contribution to supply, and unsurprisingly, have a big influence on inventory numbers.

    Comparing our numbers to those reported by the EIA shows their import data lagging behind the totals reported for the weeks ending October 14 and October 21, and then playing catch-up in the last week, the one ending October 28.

    In the two weeks prior, the EIA reported import numbers into the U.S. Gulf coast that were significantly below the Customs totals. For the week ending October 14, EIA imports into PADD 3 were 550,000 barrels per day below the Customs number, and 116,000 bpd below for the week ending October 21.

    For the week ending October 28, there was a massive correction in the data, and the EIA reported imports that were 522,000 bpd higher than Customs data.

    Not only do we believe that the EIA missed import volume in the weeks ending October 14 and October 21, but the massive stock build in the week ending October 28 suggests that there was some pent-up stock building that was not reported for at least one week if not two, and that led to the high October 28 number.

    Taking a look at the stock change over a three-week period yields a similar result to that of EIA’s PADD3 imports: they are in line with our numbers. The EIA's total stock change over the last three weeks is an 8.6mn bbl build, in line with our projection of 8.5mn bbls.

    This is an unusual time shift in the EIA data. Usually the agency is much more in line with the numbers reported by Customs, and this looks like a one-off occurrence.
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    Oil and gas producer Encana posts surprise operating profit

    Canadian oil and natural gas producer Encana Corp posted a quarterly profit, on an operating basis, as a steep fall in costs helped offset the impact of weak commodity prices.

    Encana has responded to the 60 percent drop in crude oil prices since June 2014 by slashing jobs, cutting spending and selling oil and gas assets.

    The efforts seem to be paying off. The company said on Thursday expenses fell to $600 million, from about $3.14 billion a year earlier.

    The company has also downsized operations to focus on four core North American plays: the Montney and Duvernay in Western Canada, and the Eagle Ford and Permian in the United States.

    Encana posted an operating profit of 4 cents per share, compared with the average analyst estimate of a loss of 4 cents, according to Thomson Reuters I/B/E/S.

    Revenue fell 25 percent to $979 million, but beat analysts' expectation of $718.3 million.

    Encana's oil and natural gas liquids production fell nearly 17 percent to average 117,000 barrels per day in the three months ended Sept.30, while natural gas output declined by about 14 percent to 1.33 billion cubic feet per day.

    The company said on Thursday it expected to limit production decline from its core four assets to about four percent in the fourth quarter, citing "continued improvements in capital efficiency and strong operational performance."

    Encana, which has cut over $3.5 billion of debt since 2014-end, said it paid back $2 billion of debt in the third quarter. The company had long-term debt of about $4.2 billion as of Sept.30.

    The company has sold its Gordondale assets in Alberta to Birchcliff Energy Ltd for C$625 million, and its Denver Julesburg basin oil and gas assets in Colorado for $900 million.

    Cash flow fell 32 percent to $252 million, from $371 million.

    Encana posted a net profit of $317 million in the quarter, compared with a loss of $1.24 billion a year earlier.

    The company took an impairment charge of more than $1 billion in the year-ago quarter.
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    Repsol raises cost-savings target, shrinks debt

    Repsol on Thursday reported a higher-than-expected third-quarter profit and raised its 2016 cost-savings target by 300 million euros to 1.4 billion euros ($1.56 billion).

    Europe's fifth biggest oil company, like many of its rivals, has had to cut spending to adapt to the slump in oil prices, which are down by half since June 2014. Royal Dutch Shell and BP, for example, had to rely on cost cuts to beat earnings expectations this week.

    The Spanish company said lower spending on exploration helped to cushion a fall in production revenues. It reported a 28 million euro loss in its upstream operations versus a 395 million euro loss a year earlier.

    Repsol said it had almost reached its previous costs savings target of 1.1 billion for 2016 by the third quarter.

    The group said it had ramped up production at its Latin American fields Cardin IV in Venezuela and Sapinhoa in Brazil, offsetting maintenance stoppages at sites in Trinidad and Tobago, Vietnam and Malaysia.

    In its downstream operations, which includes refining, earnings fell 42 percent in the July to September period from a year earlier.

    Repsol's net current-cost-of-supplies profit - which oil and gas companies use to adjust for fluctuations in expenses - was 307 million euros in the period, up 93 percent from a year earlier and above the 296 million euros expected by analysts in a Reuters poll.

    The company had reported its first annual loss for 2015 and cut its dividend, partly to protect its credit rating. It has also been shedding assets as well as cutting costs to help to shrink its large debt pile, which has been under scrutiny from credit ratings agencies.

    Net debt fell to just under 10 billion euros at the end of September from 11.7 billion euros three months earlier after it sold a 10 percent stake in Gas Natural.
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    Nigeria makes progress on long-delayed plan to share oil wealth

    Nigeria's Senate has moved forward a first piece of much-delayed legislation to tackle long-standing problems in managing the nation's oil wealth, aiming to agree details for full consideration in just four weeks, lawmakers said.

    The Petroleum Industry Bill (PIB), stuck in parliament for a decade, aims to tackle everything from an overhaul of state oil company NNPC to taxes on upstream projects in a sector riddled with corruption.

    The Senate, parliament's upper house, gave initial approval in the second reading late on Wednesday to the draft plan to overhaul the state oil industry, a procedural move that allows the bill to move forward, MPs said.

    In a draft seen by Reuters in April, Nigeria planned to split state oil company NNPC into two to help ease a planned stake sale in the coming years.

    "The poor performance of the NNPC is a major concern. The commercialisation of the corporation and its splitting into two entities is for more efficiency and to enhance performance," said Senator Tayo Alasoadura, who sponsored the bill.

    "It (the bill) also provides for the establishment of a single petroleum regulatory commission which will focus mainly on regulating the industry," he said.

    The draft does not include the future fiscal regime and taxation for oil firms and the role of host communities -- one of the most contentious aspects as militants and villages in the impoverished Niger Delta demand a greater share of the oil revenues it generates and more benefits from oil majors.

    The next step is for parliamentary committees to provide a report within four weeks after which the Senate will go clause by clause through the final version, lawmakers said.

    No more details were immediately available.

    Senate leader Bukola Saraki and Oil Minister Emmanuel Ibe Kachikwu have repeatedly said the bill would be split to speed up approval but not given details yet of the bill, central to President Muhammadu Buhari's reform of the sector.

    The inability to pass the bill and uncertainty around taxation and government funds during a slump in oil revenue has stunted investment, particularly in deep-water oil and gas fields.

    Nigeria's oil output has risen to 2.1 million barrels a day, Kachikwu said on Tuesday, after plunging due to militant attacks to 1.37 million barrels per day in May, the lowest level since July 1988, according to the International Energy Agency.

    Seeking to pacify the region, on Tuesday Buhari met Niger Delta leaders who presented a list of 16 demands, such as making oil firms move their country headquarters to the southern region and a army withdrawal from the area.

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    Chesapeake Energy posts surprise profit as costs slump

    U.S. natural gas producer Chesapeake Energy Corp (CHK.N) reported a surprise adjusted profit, helped by lower expenses, and said its production would fall at a slower-than-expected rate next year.

    Shares of Chesapeake, which also kept its capital budget nearly unchanged, were up 6.6 percent at $5.66 before the bell.

    Decreased costs for oilfield services and more efficient drilling processes are helping oil producers extract more barrels of oil out of the ground, without having to spend more.

    Oil producers remain tight fisted to cope with a near 60 percent fall in oil prices since mid-2014 that has depleted cash balances and forced asset sales.

    Chesapeake, which has been trying to reduce its crippling debt load, said it planned to sell more assets this year, including some of its Haynesville Shale acreage in Louisiana.

    The company had nearly $9 billion of debt outstanding as of Sept. 30.

    Excluding output from the assets the company is divesting, Chesapeake expects production to fall 5-0 percent next year, better than its previous estimate of a 7-2 percent decline.

    The company added $2 million to its 2017 budget and now expects to spend $1.82 billion-$2.62 billion.

    Chesapeake also said it expects to exit the next two years with significantly higher production.

    The company said it would exit the fourth quarter of 2017 with a 7 percent rise in total production than at the end of the current quarter. Chesapeake said oil production would grow by about 10 percent over the same period.

    Between the end of 2017 and 2018, the company expects output to climb 15 percent, with a 20 percent jump in oil production.

    Tudor Pickering Holt & Co said the company's oil production forecast was above the investment bank's estimates for both 2017 and 2018.

    The company's fourth-quarter oil output estimate of 90,000-95,000 barrels per day (bpd) also beat Wall Street expectations of 88,0000 bpd.

    Chesapeake's oil and gas production fell 3.3 percent to 59 million barrels of oil equivalent in the third quarter, largely due to asset sales.

    Net loss attributable to Chesapeake's shareholders fell nearly 75 percent to $1.20 billion from a year ago, when the company wrote down the value of some oil and gas assets by $5.42 billion.

    Adjusted profit was 9 cents per share. Analysts on average had expected a loss of 3 cents, according to Thomson Reuters I/B/E/S.

    Total operating expenses slumped nearly 63 percent, making up for a 32.6 percent fall in revenue.
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    Carrizo Oil & Gas announces third quarter 2016 results

    Carrizo Oil & Gas, Inc. today announced the Company's financial results for the third quarter of 2016 and provided an operational update, which includes the following highlights:

    Oil Production of 24,488 Bbls/d, 4% above the third quarter of 2015, as previously reported
    Total Production of 40,762 Boe/d, 13% above the third quarter of 2015, as previously reported
    Loss From Continuing Operations of $101.2 million, or $1.72 per diluted share, and Adjusted Net Income of $13.6 million, or $0.23 per diluted share
    Adjusted EBITDA of $91.2 million
    Moving stagger-stack to development mode at Brown Trust lease
    Strong results from two additional Delaware Basin wells, the Corsair State 3H and Fortress State 1H, which achieved peak 24-hour rates of approximately 1,430 Boe/d and 1,791 Boe/d, respectively
    Increasing 2016 crude oil production guidance to 25,350-25,500 Bbls/d primarily to account for the recently-announced agreement to acquire Eagle Ford Shale properties from an affiliate of Sanchez Energy Corporation

    Carrizo reported a third quarter of 2016 loss from continuing operations of $101.2 million, or $1.72 per basic and diluted share compared to a loss from continuing operations of $708.8 million, or $13.75 per basic and diluted share in the third quarter of 2015. The loss from continuing operations for the third quarter of 2016 includes certain items typically excluded from published estimates by the investment community, including the impairment of proved oil and gas properties recognized this quarter. Adjusted net income for the third quarter of 2016 was $13.6 million, or $0.23 per basic and diluted share compared to $10.4 million, or $0.20 per basic and diluted share in the third quarter of 2015.

    For the third quarter of 2016, Adjusted EBITDA was $91.2 million, a decrease of 20% from the prior year quarter as the impact of lower commodity prices more than offset the impact of higher production volumes.Production volumes during the third quarter of 2016 were 3,750 MBoe, or 40,762 Boe/d, an increase of 13% versus the third quarter of 2015. The year-over-year production growth was driven by strong results from the Company's Eagle Ford Shale and Delaware Basin assets, as well as a lower level of voluntary curtailments in its Marcellus Shale assets. Oil production during the third quarter of 2016 averaged 24,488 Bbls/d, an increase of 4% versus the third quarter of 2015; natural gas and NGL production averaged 69,262 Mcf/d and 4,730 Bbls/d, respectively, during the third quarter of 2016. Third quarter of 2016 production exceeded the high end of Company guidance due primarily to stronger-than-expected performance from the Company's Eagle Ford Shale and Delaware Basin assets as well as lower-than-planned levels of voluntary curtailments from its Marcellus Shale assets.

    Drilling and completion capital expenditures for the third quarter of 2016 were $125.8 million. Approximately 80% of the third quarter drilling and completion spending was in the Eagle Ford Shale, with the balance weighted towards the Delaware Basin and Niobrara Formation. Land and seismic expenditures during the quarter were $6.2 million. Carrizo is increasing its 2016 drilling and completion capital expenditure guidance to $400-$410 million from $370-$380 million. Approximately one third of the increase results from additional infrastructure spending associated with incremental Delaware Basin activity as well as bringing forward infrastructure spending previously planned for 2017 in order to capitalize on the current depressed service cost environment. The balance of the increased spending results from additional drilling and completion activity in the Eagle Ford Shale and Delaware Basin. In the Eagle Ford, the Company now expects to drill an additional four wells due to continued operational efficiencies, and in the Delaware Basin, the Company has elected to drill and complete one additional well due to the strong results from its recent completions. The Company is increasing its land and seismic capital expenditure guidance to $25 million for the year from $20 million.

    Last month, Carrizo agreed to acquire approximately 15,000 net acres located primarily in the volatile oil window of the Eagle Ford Shale for $181 million, subject to customary closing adjustments. Following the closing of the transaction, Carrizo will hold approximately 101,000 net acres in the Eagle Ford Shale, concentrated in LaSalle, McMullen, and Atascosa counties. The acquired properties had estimated net production during September of approximately 3,100 Boe/d (61% oil) from 93 net producing wells, and Carrizo has identified approximately 80 net de-risked drilling locations in the Lower Eagle Ford Shale, with material upside potential beyond this. The transaction has an effective date of June 1, 2016, and is currently expected to close by mid-December, 2016. A map of the acreage to be acquired and how it fits in with the Company's existing position can be found on the Carrizo website.

    Carrizo is increasing its 2016 oil production guidance to 25,350-25,500 Bbls/d from 25,150-25,400 Bbls/d previously. The majority of the increase results from production associated with the proposed Eagle Ford Shale acquisition. Using the midpoint of this range, the Company's 2016 oil production growth guidance is 10%. For natural gas and NGLs, Carrizo is increasing its 2016 guidance to 68-69 MMcf/d and 4,800-4,900 Bbls/d, respectively, from 64-66 MMcf/d and 4,600-4,700 Bbls/d. For the fourth quarter of 2016, Carrizo expects oil production to be 27,300-27,700 Bbls/d, and natural gas and NGL production to be 60-64 MMcf/d and 4,800-5,000 Bbls/d, respectively. A full summary of Carrizo's guidance is provided in the attached tables.
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    Saudi crude in the med: ARAMCO reverses course?

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    Militants attack NNPC pipeline in Niger Delta - military

    Nigeria Nov 2 Militants in Nigeria's southern Niger Delta oil hub attacked a pipeline operated by the Nigerian National Petroleum Corporation, the military and a witness said on Wednesday.

    The Batan flow station, around Ekweregbene, was attacked, a military spokesman said, while Sheriff Mulade, a witness, said it had taken place at around 1200 GMT.

    The flow station is located in a creek between the southern city of Warri and the Forcados oil terminal, which last week resumed crude exports following repairs after an attack.
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    Summary of Weekly Petroleum Data for the Week Ending October 28, 2016

    U.S. crude oil refinery inputs averaged over 15.4 million barrels per day during the week ending October 28, 2016, 104,000 barrels per day less than the previous week’s average. Refineries operated at 85.2% of their operable capacity last week. Gasoline production decreased slightly last week, averaging over 9.8 million barrels per day. Distillate fuel production increased last week, averaging about 4.7 million barrels per day.

    U.S. crude oil imports averaged 9.0 million barrels per day last week, up by 2.0 million barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.7 million barrels per day, 7.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 458,000 barrels per day. Distillate fuel imports averaged 60,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 14.4 million barrels from the previous week. At 482.6 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.2 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.8 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 0.3 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 9.0 million barrels last week.

    Total products supplied over the last four-week period averaged 20.2 million barrels per day, up by 2.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.1 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, up by 3.7% from the same period last year. Jet fuel product supplied is up 5.7% compared to the same four-week period last year.

    Cushing up 100,000 bbl

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    Another small increase in US oil production

                                                         Last Week     Week Before   Last Year

    Domestic Production '000........... 8,522              8,504              9,160
    Alaska ................................................ 510                 501                  509
    Lower 48 ........................................ 8,012              8,003              8,651
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    Constitution Pipeline Case Goes to Court in 2 Weeks, Briefs Filed

    You may recall that in April, New York’s anti-drilling governor, Andrew Cuomo, decided he would cave to pressure from radical environmentalists once again and block the building of the federally-approved Constitution Pipeline. 

    Cuomo’s toadies at the Dept. of Environmental Conservation (DEC) denied the Constitution the permits it needs to cross creeks and swamps. That was finally enough for Williams and the other partners in the project, who promptly sued NY in federal, NOT state, court. 

    The court venue is important, because in NY our court system at the highest level is corrupt–the governor appoints judges and those judges like their big-salary jobs and want to get reappointed–so they “decide” cases the way Andy wants them decided. 

    We’ve predicted, repeatedly, that the NY DEC runs the very real risk of being removed from the decision process when it comes to federally-approved pipeline projects. If they lose the Constitution case, they will no longer have a role to play. Even the libs at Bloomberg think the DEC has a weak case (see Bloomberg Predicts Court Will Strip NY’s Right to Stop Constitution). 

    We’re now two weeks away from the court hearing date and Williams has filed a couple of briefs blasting the DEC and the DEC has filed a brief responding. It’s turning into a legal brawl. Warning to Williams: be prepared to fight like a New York street-fighter. Fortunately, the case sits in U.S. Circuit Court of Appeals and not the NY Court of Appeals (NY’s highest court)…
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    Europe’s Biggest Oil Company Thinks Demand May Peak in 5 Years

    Royal Dutch Shell Plc, the world’s second-biggest oil company by market value, thinks demand for oil could peak in as little as five years.

    “Oil, we’ve long been of the opinion that demand will peak before supply,” Chief Financial Officer Simon Henry said on a conference call on Tuesday. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.”

    The World Energy Council has forecast that petroleum consumption will peak in 2030 if renewable energy and other disruptive technologies continue to improve rapidly. Michael Liebreich, founder of Bloomberg New Energy Finance, predicts the growth of electric vehicles and better fuel efficiency mean oil demand will peak around 2025 and decline in the 2030s.

    Shell will still be in business for “many decades to come” because it is focusing more on natural gas and expanding its new-energy businesses including biofuels and hydrogen, Henry said.

    “Even if oil demand declines, its replacements will be in products that we are very well placed to supply one way or the other, so we need to be the energy major of the 2050s,” Henry said. “That underpins our strategic thinking. It’s part of the switch to gas, it’s part of what we do in biofuels, both now and in the future.”

    Shell sees “oil and gas as being part of the energy mix for many decades to come,” it said in a statement Wednesday.

    Shell bought BG Group Plc for $54 billion this year in a move the company said was partly aimed at increasing its gas business. Gas made up about 48 percent of the company’s total production in the third quarter ended Sept. 30, according to data compiled by Bloomberg. UK competitor BP Plc had 38 percent gas, including from units, in the period.

    The anticipated increase in demand of about 20 million barrels a day over the next two decades will probably be big enough to overwhelm the impact of the electric car, Spencer Dale, chief economist for BP, said Oct. 11. Those vehicles will have a bigger impact in 30 to 50 years, although there’s a chance it could happen sooner, he said.
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    Colonial Pipeline plan to cut off dirty jet fuel could hit airlines

    Major airlines including Delta, United and American could face higher fuel costs if U.S. regulators allow Colonial Pipeline Co to stop shipping a dirtier blend of jet fuel by 2018.

    The Colonial system carries most of the jet fuel that is delivered via pipeline to the East Coast and used by busy airports serving New York, Washington, D.C. and Atlanta, along with U.S. military bases.

    The pipeline company said earlier this month it would ask the Federal Energy Regulatory Commission for permission to halt shipments of high-sulfur jet fuel and diesel.

    Preliminary estimates indicate that jet fuel prices could rise significantly if Colonial wins approval, said John Heimlich, chief economist for the industry trade group Airlines for America (A4A).

    Rising fuel prices could make certain flights unprofitable, forcing airlines to cut service and sell fewer seats - likely at higher prices.

    It would take jet fuel price increases of 30 to 50 cents per gallon to have a big impact on pricing or flight availability, said Robert Mann, an industry consultant and former executive at American and other airlines. Jet fuel in the New York Harbor traded at about $1.44 per gallon as of Tuesday.

    A Colonial spokeswoman said the pipeline company was discussing its regulatory proposal with affected airlines but declined further comment to Reuters.

    The move would allow Colonial, which daily ships more than 3 million barrels of petroleum products, to more efficiently move more low-sulfur products through its pipeline. Cutting down on dirtier fuels would reduce so-called "transmix," which occurs when high-sulfur and low-sulfur products are combined. The resulting mixture has to be refined or blended again.

    Colonial has not specified what it intends to ship in place of high-sulfur fuels. But the pipeline has been full for about four years, and Colonial would likely see strong demand for any open space.

    The company shut its gasoline pipeline for the second time in less than two months on Monday after an explosion in Alabama killed one worker and injured five others. It briefly shut the distillates line as well, which transports jet fuel.

    American Airlines Group Inc, United Continental Holdings Inc and JetBlue Airways Corp declined to comment on Colonial's regulatory proposal, referring questions to A4A. A spokeswoman for Southwest Airlines Co declined to comment, saying the airline is still evaluating the plan.

    Delta Air Lines Inc may be more insulated from fuel price shocks than others because the company operates a refinery in the northeast U.S. that is heavily geared toward jet fuel production. Delta did not respond to requests for comment.


    Colonial's plan is driven largely by waning demand for high-sulfur fuels. Railroad and marine transportation companies, for instance, are using less high-sulfur diesel fuel in response to environmental regulations.

    Sulfur levels in jet fuel are not currently regulated, however, and the industry still uses high-sulfur fuels widely, in part because they have better lubricating qualities for airplane engines.

    Airlines can and do use a range of cleaner fuels, Heimlich said, which Colonial would continue to ship under its proposal. But airlines are concerned that many refiners could take years to make upgrades required to produce jet fuel to Colonial's proposed low-sulfur standard.

    Some refiners would need to invest in desulfurization units known as hydrotreaters, said David Hackett, president of the energy consultancy Stillwater Associates. Or they could update their facilities to process sweet crude instead of high-sulfur sour crude.

    Either way, refinery costs would go up, and the transition would take time, raising the prospect of airline fuel shortages.

    "Three years is minimum," Hackett said.


    Colonial needs permission from the energy commission to stop shipments of high-sulfur fuel, and the airlines can exert influence on that process.

    A commission spokeswoman declined to comment, noting that Colonial's proposal has not been formally filed with the agency.

    At stake is a large portion of the about 400,000 barrels per day (bpd) of jet fuel that moves from the U.S. Gulf to the East Coast via pipeline, according to U.S. Energy Department data. About two-thirds of East Coast jet fuel demand is currently met by pipeline flows from the Gulf Coast, according to analysts at Energy Aspects.

    If Colonial wins approval, airports in the southeastern U.S. may turn to Kinder Morgan's 700,000 barrel-per-day Plantation Pipeline, which has less than a third of Colonial's capacity. Kinder Morgan, in a statement, said it is "evaluating the changing market conditions" before considering any expansion of shipping high-sulfur jet fuel.

    If Plantation and other interstate pipelines followed Colonial's lead, it could make supplying airports even more challenging.

    Trucking fuel to major airports is not feasible due to the sheer volume of fuel needed.

    Waterborne shipments could be expensive, in part due to the Jones Act, a maritime policy which requires goods transported by water between U.S. ports to be carried on U.S.-flagged ships. That may make it cheaper to import jet fuel, particularly from Europe.
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    Russia's oil output in Oct hits new post-Soviet era high

    Russia's oil output set a new post-Soviet era record high in October, rising 0.1 percent fromSeptember to 11.2 million barrels per day (bpd), energy ministry data showed on Wednesday.

    The rise underscores the difficulty the government could have in freezing output levels as part of a global pact with other top producers in order to support oil prices.

    Oil and gas sales account for more than a third of Russia's state budget revenues, down from half in 2014 reflecting a fall to below $50 per barrel from $115.

    In tonnes, Russia's oil output in October rose to 47.386 million from 45.483 million in September.

    Supply from the Organization of the Petroleum Exporting Countries also rose to a record level in October as Nigerian and Libyan output partially recovered from disruptions and Iraq
    boosted exports.

    Ministry data showed Rosneft increased production by 0.1 percent, Lukoil's output rose by 0.9 percent, and Surgutneftegaz cut production by 0.3 percent.

    The rise in Russian crude output has been supported by a increase in drilling as companies capitalise on a weaker rouble.

    "The pace of the growth in drilling has been maintained, at 16 percent for the nine months of the year, while Rosneft cranked up drilling at Samotlor oilfield by 40 percent and by 67 percent at Yugansk," said Valery Nesterov, analyst at Sberbank CIB.

    We see that the energy ministry is in a predicament while  holding the talks about the (output level) freeze."

    He added that the quality of the drilling, such as horizontal drilling, has also improved.

    The ministry expects a rise in oil output in 2017 to 548 million tonnes, or 11 million barrels per day, due to new fields coming onstream.

    Nesterov said that Russia has potential for growth to 2019, when a peak of 570-575 million tonnes could be reached thanks to investments made before sanctions introduced by the West against Moscow for its role in the Ukrainian crisis in 2014

     The measures virtually bar Russian oil producers from raising capital on the Western debt market.

    This week, Russia's No.2 oil producer Lukoil launched the Filanovsky offshore oil field in the Caspian Sea, the second major oil field opened by Russia in a week and the fourth this year.

    Natural gas production in Russia rose to 61.07 billion cubic metres (bcm) or 1.97 bcm per day in October from 51.33 bcm in September.
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    Sewage to Crude

    RICHLAND, Wash. – It may sound like science fiction, but wastewater treatment plants across the United States may one day turn ordinary sewage into biocrude oil, thanks to new research at the Department of Energy's Pacific Northwest National Laboratory.

    The technology, hydrothermal liquefaction, mimics the geological conditions the Earth uses to create crude oil, using high pressure and temperature to achieve in minutes something that takes Mother Nature millions of years. The resulting material is similar to petroleum pumped out of the ground, with a small amount of water and oxygen mixed in. This biocrude can then be refined using conventional petroleum refining operations.

    Wastewater treatment plants across the U.S. treat approximately 34 billion gallons of sewage every day. That amount could produce the equivalent of up to approximately 30 million barrels of oil per year. PNNL estimates that a single person could generate two to three gallons of biocrude per year.

    Sewage, or more specifically sewage sludge, has long been viewed as a poor ingredient for producing biofuel because it's too wet. The approach being studied by PNNL eliminates the need for drying required in a majority of current thermal technologies which historically has made wastewater to fuel conversion too energy intensive and expensive. HTL may also be used to make fuel from other types of wet organic feedstock, such as agricultural waste.

    What we flush can be converted into a biocrude oil with properties very similar to fossil fuels. PNNL researchers have worked out a process that does not require that sewage be dried before transforming it under heat and pressure to biocrude. Metro Vancouver in Canada hopes to build a demonstration plant.

    Using hydrothermal liquefaction, organic matter such as human waste can be broken down to simpler chemical compounds. The material is pressurized to 3,000 pounds per square inch — nearly one hundred times that of a car tire. Pressurized sludge then goes into a reactor system operating at about 660 degrees Fahrenheit. The heat and pressure cause the cells of the waste material to break down into different fractions — biocrude and an aqueous liquid phase.

    "There is plenty of carbon in municipal waste water sludge and interestingly, there are also fats," said Corinne Drennan, who is responsible for bioenergy technologies research at PNNL. "The fats or lipids appear to facilitate the conversion of other materials in the wastewater such as toilet paper, keep the sludge moving through the reactor, and produce a very high quality biocrude that, when refined, yields fuels such as gasoline, diesel and jet fuels."

    In addition to producing useful fuel, HTL could give local governments significant cost savings by virtually eliminating the need for sewage residuals processing, transport and disposal.

    Simple and efficient

    "The best thing about this process is how simple it is," said Drennan. "The reactor is literally a hot, pressurized tube. We've really accelerated hydrothermal conversion technology over the last six years to create a continuous, and scalable process which allows the use of wet wastes like sewage sludge."

    An independent assessment for the Water Environment & Reuse Foundation calls HTL a highly disruptive technology that has potential for treating wastewater solids. WE&RF investigators noted the process has high carbon conversion efficiency with nearly 60 percent of available carbon in primary sludge becoming bio-crude. The report calls for further demonstration, which may soon be in the works.

    Demonstration Facility in the Works

    PNNL has licensed its HTL technology to Utah-based Genifuel Corporation, which is now working with Metro Vancouver, a partnership of 23 local authorities in British Columbia, Canada, to build a demonstration plant.

    "Metro Vancouver hopes to be the first wastewater treatment utility in North America to host hydrothermal liquefaction at one of its treatment plants," said Darrell Mussatto, chair of Metro Vancouver's Utilities Committee. "The pilot project will cost between $8 to $9 million (Canadian) with Metro Vancouver providing nearly one-half of the cost directly and the remaining balance subject to external funding."

    Once funding is in place, Metro Vancouver plans to move to the design phase in 2017, followed by equipment fabrication, with start-up occurring in 2018.

    "If this emerging technology is a success, a future production facility could lead the way for Metro Vancouver's wastewater operation to meet its sustainability objectives of zero net energy, zero odours and zero residuals," Mussatto added.

    Nothing left behind

    In addition to the biocrude, the liquid phase can be treated with a catalyst to create other fuels and chemical products. A small amount of solid material is also generated, which contains important nutrients. For example, early efforts have demonstrated the ability to recover phosphorus, which can replace phosphorus ore used in fertilizer production

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    Demand for gas to spur exploration in Cooper, Otway basins – report

    South Australia’s Cooper and Otway basins are poised for greater exploration on the back of higher gas demand from the eastern states, a new report by consultancy firm Core Energy has found.

    The report, commissioned by the South Australian Department of State Development and published this week, noted that by 2018, yearly demand in the eastern Australiagas sector would approach about 2 000 PJ, rising from a historical high of about 700 PJ.

    This means there would need to be an underlying reserve of about 40 000 PJ to support 20 years of activity, and 80 000 PJ over a 40-year outlook.

    The report noted that gas resources located within or near existing gas production, transport, and processing in the Cooper and Otway basins were considered the best opportunity for further exploration, development and to supply gas markets at the lowest costs.

    “Affordable gas is becoming more and more important as the National Electricity Market transitions away from coal-fired power towards a mix of gas and renewables,” said Mineral Resources and Energy Minister Tom Koutsantonis.

    “Last month, the state government announced that we will be partnering with gas companies through a grant scheme that will incentivise more gas to be extracted and supplied to the South Australian market first, which will put downward pressure on power prices.”

    Koutsantonis said that the report indicated the scale of the potential for the development of new gas projects in the Cooper and Otway basins.

    “These South Australian resources could underpin decades of gas supply for both domestic gas and export liquefied natural gas (LNG) markets.”

    In February, the Department of State Development documented preliminary estimates indicating there is more than 600-trillion cubic-feet of sales gas and 80-billion barrels of oil in place – all within the Cooper basin’s tight sand, shale and deep coal reservoirs.
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    Anadarko sells East Texas for over $1bn

    Anadarko Petroleum sold a large package of assets in east Texas and north Louisiana in the Haynesville shale and Bossier trends for upwards of $1 billion.

    The US independent brought in “more than $1 billion” for its assets around the Carthage and Elm Grove fields and the transaction is expected to close at the end of the year.

    The asset package included 195,000 acres with net production of 325.8 million cubic feet of natural gas equivalent per day that had been split into two packages — Carthage and Elm Grove.

    The Carthage package was comprised of almost 105,000 net acres mostly in Rusk, Harrison and Panola counties in Texas in what Anadarko considers the heart of the Cotton Valley, Haynesville Shale and liquids-rich Bossier trends, The acreage was producing almost 275 MMcfd.

    The Elm Grove package included 90,000 net acres in Cass and Marion counties in Texas and Bossier and Caddo parishes in Louisiana in what Anadarko called the core of the dry gas Haynesville fairway.

    Bids on the packages, which comprise Anadarko’s entire Haynesville and east Texas position, were due in late June according to marketing materials seen by Upstream.

    The roughly $1 billion valuation is in line with what analysts had predicted for the sale.
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    Devon posts better-than-expected profit

    US oil producer Devon Energy reported a better-than-expected quarterly profit as cost savings cushioned the impact of weak oil prices.

    Devon has cut its lease operating expenses, including labor and supply costs, to offset a more than 55% slide in oil prices since mid-2014.

    The company, which expects cost savings to reach $1 billion this year, said total operating expenses fell 69.4% in the third quarter ended 30 September.

    Total production, net of royalties, fell 15.1% to 577,000 barrels of oil equivalent per day.

    Devon said it expects to increase its rig activity in the United States from five rigs running in the third quarter to as many as 10 by the end of this year.

    Net earnings attributable to Devon was $993 million, or $1.89 per share, in the third quarter, compared with a loss of $3.51 billion, or $8.64 per share, a year earlier.

    The year-ago quarter included a non-cash, asset impairment charge of $5.85 billion.

    Excluding items, it earned 9 cents per share for the latest quarter, beating the average analyst estimate of 5 cents per share, according to Thomson Reuters.

    Total revenue rose 17.6% to $4.23 billion in the three months ended 30 September, boosted by a $1.35 billion gain from asset sales.
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    Noble Energy posts smaller-than-expected loss as costs fall

    Oil and gas producer Noble Energy Inc posted a much smaller-than-expected loss in the third quarter as lower expenses helped offset the impact of weak oil prices.

    Noble, which said in May it expects to spend less the $1.5 billion it had budgeted for the year, said total operating expenses fell 9.8 percent to $1.16 billion in the quarter.

    The company's sales volumes rose 12 percent in the three months ended Sept. 30, while lease operating expenses fell 14 percent to average $3.37 per barrel of oil equivalent.

    The net loss attributable to Noble narrowed to $144 million, or 33 cents per share, in the quarter, from $283 million, or 67 cents per share, a year earlier.

    Excluding items, Noble's loss was 7 cents per share.

    Analysts on average were expecting a loss of 23 cents, according to Thomson Reuters I/B/E/S.

    Noble's total revenue rose 11.1 percent to $910 million, but fell short of analysts' expectations of $980.6 million.

    Noble's shares closed up nearly 2 percent at $35.15 in regular trading on Tuesday. They were unchanged after the bell.
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    TransCanada sells U.S. Northeast Power unit to fund Columbia deal

    TransCanada Corp, Canada's No. 2 pipeline operator, said on Tuesday it will sell its U.S. Northeast Power business and do a bought deal common share offering to help fund its acquisition of the Columbia Pipeline Group earlier this year.

    The Calgary-based company bought Columbia for $10.3 billion, transforming TransCanada into one of North America's largest natural gas transmission businesses and easing concerns over the its growth outlook, which had been hindered by regulatory challenges on crude oil pipelines.

    "The actions announced today build on the transformational acquisition of Columbia... which provided us with a new platform for growth," TransCanada chief executive Russ Girling said in a conference call.

    TransCanada will sell four power assets to Helix Generation an affiliate of LS Power Equity Advisors for $2.2 billion. The TC Hydro business will be sold to Great River Hydro an affiliate of ArcLight Capital Partners for $1.065 billion.

    Together the two sales are expected to realize approximately $3.7 billion, and will be used to repay a portion of the $6.9 billion loan used to help finance the Columbia deal.

    TransCanada also said it expects to raise around C$3.2 billion ($2.39 billion) from the bought deal common share offering with a syndicate of underwriters led by BMO Capital Markets, TD Securities and RBC Capital Markets.

    The underwriters have the option to purchase an extra 5.475 million common shares at C$58.50 each for up to 30 days after the closing of the offering.

    The company has decided against selling any share of its natural gas pipeline portfolio in Mexico, where it owns two pipelines and is investing $3.8 billion in building four more.

    TransCanada on Tuesday reported a quarterly loss in part because of a C$656 million after-tax goodwill impairment charge related to its U.S. Northeast Power business.

    The company recorded a third-quarter net loss attributable to shareholders of C$135 million or 17 Canadian cents per share. That compared with a net income of C$402 million, or 57 Canadian cents, in the year-ago period.

    Adjusted earnings, which exclude most one-time items, rose to C$622 million, or 78 Canadian cents per share, from C$440 million, or 62 Canadian cents, in the same period in 2015.
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    Pioneer Natural profit misses Street despite output jump

    Pioneer Natural Resources Co posted a lower-than-expected quarterly profit on Tuesday as an increase in the average selling price and sales of its oil failed to offset higher expenses.

    Pioneer boosted its 2016 production forecast slightly and increased its hedging program for 2017, highlighting executives' optimism that the oil market has reached a kind of equilibrium after more than two years of uncertainty.

    The company posted a third-quarter net income of $22 million, or 13 cents per share, compared to $646 million, or $4.27 per share, in the year-ago period, which included a one-time gain from asset sales.

    Analysts expected earnings of 16 cents per share, according to Thomson Reuters I/B/E/S.

    Average sales volumes rose 13 percent to 238,878 barrels of oil equivalent per day. Pioneer exported 610,000 barrels of oil from the Permian Basin of West Texas to Europe during the quarter, executives said.

    The average price Pioneer received for its oil and natural gas rose 2 percent to $29.24 per barrel of oil equivalent.

    Still, the company's expenses rose about 1 percent during the quarter.

    Scott Sheffield, Pioneer's outgoing chief executive, said he expects the company to be cash flow neutral by 2018 if oil prices stay near $55 per barrel.
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    Pakistan LNG to buy 240 shipments

    Pakistan LNG Ltd has launched a mid- and a long-term tender to purchase a combined 240 shipments of liquefied natural gas (LNG), the company said on its website.

    The mid-term tender covers a period of five years and calls for 60 shipments, while the long-term tender is for 15 years and 180 cargoes, according to information presented in the tender note.

    Suppliers must submit bids by Dec 20.
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    U.S. gasoline futures spike on Colonial pipe explosion in Alabama

    U.S. gasoline futures jumped over 11 percent on Tuesday after Colonial Pipeline Co  shut down its main gasoline and distillates pipelines on Monday after an explosion and fire in Shelby, Alabama, killed a worker.

    The incident was the second time in two months the company had to close the crucial supply line to the U.S. East Coast, prompting gasoline prices to spike on fears of shortages.

    Gasoline futures for December were up about 16 cents, or 11.1 percent, at $1.58 per gallon at 8:05 a.m. EDT (1205 GMT).

    Earlier in the session, the contract jumped as high as $1.6351, its highest since early June.

    A nine-man crew was conducting work on the Colonial pipeline system at the time of the explosion, Alabama Governor Robert Bentley told a briefing. Seven of the workers were injured, with two evacuated by air.

    The explosion occurred when the crew hit the gasoline pipeline (Line 1) with a track hoe, Colonial said an e-mailed statement late on Monday.

    The 5,500-mile (8,850-km) Colonial Pipeline is the largest U.S. refined products pipeline system and transports gasoline, diesel and jet fuel from the U.S. Gulf Coast to the New York Harbor area.


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    EIA: US shale flows to continue decline

    Oil flows from the Eagle Ford Shale, one of the three largest in the country, are projected to drop by 35,000 bpd to 947,000 bpd between October and November, according to the latest figures from the US Energy Information Administration (EIA).

    Eagle Ford natural gas production is expected to show a similar decline, falling 183 million cubic feet of natural gas per day to 5.625 billion cubic feet of gas per day.

    The Bakken tight oil play in North Dakota - currently the third largest in the US – is expected to decline by 21,000 bpd to 947,000 bpd and see gas production fall 23 MMcfd to 1.626 Bcfd.

    The red-hot Permian basin is the only US tight oil play where production is expected to increase. Operators have added dozens of rigs to their holdings there over the past four months.

    Permian oil production, which includes flows from both the Delaware and the Midland sub-basin, is expected to increase by 30,000 bpd to 2.012 MMbpd and natural gas production is expected to jump by 58 MMcfd to 7.43 Bcfd.

    Natural gas production from the largest US field – the Marcellus Shale - is projected to increase 73 MMcfd to 18.193 Bcfd but the additional production from the Marcellus and the Permian will not be enough to reverse the trend of declining US natural gas production, which the EIA expects to fall by 178 MMcfd nationwide between October and November.

    Production from the Haynesville shale, the second largest gas play in the country, is projected to decline 45 MMcfd to 5.790 Bfcd, contributing to a nationwide decline of 178 MMcfpd in US shale gas production for a total of 45.958 Bfcd.

    The declines come despite gains in the new production that can be created from each rig running for one month in the plays.

    Every single US tight oil play showed increasing efficiency, led by the Niobrara, where operators can now expect to create 1053 bpd of additional production from one rig – up 27 bpd.

    The Bakken saw its new-rig production increase by 23 bpd to 923 and the Eagle Ford posted a 16 bpd increase to 1201 bpd.

    Both the Marcellus and Haynesville plays showed flat new-production per rig per month.

    The EIA recently began tracking the number of wells that operators drill but do not complete immediately (DUC) in the major shale plays and found that the number of DUCs nationwide had declined by 27.

    The largest drop was seen in the Eagle Ford, which logged a decrease of 36 DUCs to a total of 1276.

    The Permian was the only play that saw an increase in DUCs, adding 52 for a total of 1378.
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    Nigerian oil output rises again


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    Occidental Petroleum's loss larger than expected as output falls

    Occidental Petroleum Corp reported a larger-than expected quarterly loss on Tuesday as the company produced fewer barrels of oil and gas and commodity prices remained low.

    The Houston-based company's production from ongoing operations, including its international business, fell 12.2 percent to 605,000 barrels of oil equivalent (boe) per day.

    The company said its average worldwide realized crude oil prices were $41.49 per barrel, down 13.2 percent from a year earlier.

    Occidental said its daily production in Texas' Permian Basin rose by 5,000 boe, but was offset by lower production of natural gas and related liquids.

    Occidental said on Monday it acquired 35,000 acres (14,164 hectares) of West Texas acreage for $2 billion in cash, boosting its position in the oil-rich Permian Basin.

    The company's quarterly net loss narrowed to $241 million, or 32 cents per share, from $2.61 billion, or $3.42 per share.

    The year-earlier quarter included a $2.6 billion after-tax charge related to scrapped projects and a sharp decline in oil and gas prices.

    Adjusted loss of 15 cents per share was larger than the average analyst estimate of 11 cents, according to Thomson Reuters I/B/E/S.

    Revenue fell 15.8 percent to $2.73 billion, but came in above expectations of $2.69 billion.
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    Iraq asks oil majors to downsize costly Dubai offices: sources

    Iraq has asked international oil companies (IOCs) to shut down prestige offices among the glittering towers of Dubai, through‎ which they used to run their oil operations in Iraq, as a way to rein in their budgets, three industry sources said.

    The move, which has been taken by some oil majors developing Iraq's vast southern oilfields, would mean that the companies will have to move hundreds of contractors in and out of the country every few weeks and leading to downsizing of companies' regional hubs based nearby in the United Arab Emirates.

    With its finances stretched, Iraq, OPEC's second biggest producer, asked foreign oil companies last year to spend less than they had proposed, and all but cut off investment entirely for the first half of this year to the major projects.

    Oil companies helping Iraq develop its massive fields have to clear their spending with Baghdad each year, including staffing costs. They are then repaid with income from Iraq's exports of crude produced from existing fields.

    The arrangement worked smoothly when oil prices were above$100 a barrel but the collapse in global crude prices meant Baghdad was paying the same fees in pricey Dubai while its revenue from oil sales is significantly lower.

    The emirate of Dubai, with its glitzy lifestyle and cosmopolitan culture, is one of the world's most popular financial hubs for regional and international companies for its safety and pro-investments approach.

    Oil majors such as Royal Dutch Shell, BP, Total, and Lukoil, who all operate Iraqi oilfields, have their regional offices in Dubai.

    "It is one of the measures taken by the ministry of oil by asking the oil companies to reduce the cost and the number of workers to the minimum level, and shut down the offices in Dubai," said an Iraqi oil industry source.

    "We don't see there is a benefit of having offices in Dubai, they can come to Iraq with lower cost, because all this are being paid out of the petroleum (service contract) cost."

    Two executives from international oil companies operating in Iraq confirmed.

    "We used to operate Iraq from our Dubai office and people used to commute in and out of the country. Now the Iraqis said 'no, you close the Dubai office and stay in the country for 6 weeks, then take 2 weeks out to the original destination'," said an oil industry source from one of the companies.

    Shell for example, which said in May it would cut 12,500 jobs, or about 12.5 percent of its workforce worldwide, was downsizing its office in Dubai and rearranging its operations there after the global employee cuts and closure of Iraq-linked office in the UAE.

    "The (Iraqi oil) ministry have been writing to the IOCs for the last four years on Dubai offices," said a foreign oil executive, adding that the ministry has probably been deducting the Dubai office cost from invoices paid to oil companies for the past year.

    Iraq has reached agreement with BP, Shell and Lukoil to restart stalled investment in oil fields the firms are developing, allowing projects that were halted this year to resume and crude production to increase in 2017, Iraqi oil officials told Reuters in August.

    Iraq relies on oil for nearly all its revenues and is spending heavily to fight Islamic State in its northern and western provinces.
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    The Qatar LNG Backflip

    Look wherever you want, you are swamped by stories on the LNG wave that's about to hit Europe. After almost a decade of neglect, Europe becomes the powerhouse of global LNG trade again not because of its vanilla qualities but rather because its the last place where LNG exporters with no captive buyer can go.
    I kicked that issue to death in other articles and we will no doubt come back to the general topic many times as this will haunt us for a long while. For now, however, let's concentrate on one of the fundamental core drivers of this oversupply situation. Everyone is going to stare with his eyes wide shut at the US and Australia for clues on what is going to happen over the next months - years - decades maybe.
    However, really understanding the kernel of truth in this whole madness requires us to take off the velvet gloves and pick apart the position of the most glorious of all LNG players - the Qataris. Yes, you read alright. The superstars of the LNG trade are not at all bystanders in this game as their position is as precarious as many others. And they had it coming for a lot of years.

    Qatar is - for the time being - the biggest LNG seller. Soon they will be overtaken by the Aussies just like the Qataris overtook the Indonesians some couple of years ago. They will still remain one of the very large players for the foreseeable future so anything that happens to Qatar necessarily produces effect in the wider LNG world.
    Those with memories of more than the last quarter might remember the original Qatari LNG marketing strategy. More than 10 years ago, they lived in their marvelous world of LNG scarcity where everyone had beaten a path to their doors and showered them with cash. And they did what people in such a luxurious position do. They divided the world (the LNG consuming world) into 3 regions which should each receive roughly a third of all available Qatari LNG.
    A nice plan but then, something called the shale gas revolution made North America - once hailed as the El Dorado for LNG sellers - a dead land for them. With the onset of shale, the nice plan of the Qataris was mush.What came to the rescue was one of the biggest calamities we know of in the energy world - the Fukushima disaster. How that?
    Japan has been the biggest importer of LNG for many decades now. The island is entirely dependent on LNG when it comes to Natural Gas. It has no real Natural Gas production of its own and is separated from gas exporters by deep ocean trenches which make offshore pipelines unfeasible. Underground storage is also not possible for lack of geological structures that would welcome such activity so all of the flexibility Japan needed came from the storage tanks. That's why Japan overbuilt on them massively. They needed to be sure that there is always enough LNG in store to keep the massive Japanese economy humming on no matter what.
    Traditionally, Japan had organized its energy portfolio into baseload and peak. They had anointed nuclear and coal as baseload power and oil plus LNG as peak power. Makes a lot of sense as oil and LNG are the pricier options - usually. When Fukushima hit them in 2011, LNG already showed signs of weakening. Suddenly the entire nuclear generation park of the then second largest economy on earth screeched to a halt taking out a massive part of the baseload power picture. Japan maxed out on the rest of the generation portfolio in an emergency which means that lots of peak power production was going baseload.
    This, in turn, meant a lot more LNG was required and as the capacity was there (remember there was always overcapacity in storage and generation in order to be ready for any peak), Japan became the biggest devourer of freely available LNG in the world - at any price one must add. Their immediate energy security was more important than petty price considerations.
    This wiped out a looming global LNG glut (remember the LNG destined for the US but not needed anymore because of shale) in an instant and enabled producers to feast on super high prices for a while longer. Japan fattened those producers to the point where everyone believed that this is a 'happy ever after' party. Except that - it wasn't.
    The effects of this binge party were what we can observe today - projects mainly in the US and in Australia that took FID at obscenely high cost. I would guess that if the much smaller glut in 2011 would have allowed unfolding - which means that had Fukushima never happened - then most of those projects would not have seen the light of day. This also means that there would not be a tidal wave of LNG on our shores today and many of the issues we face today such as LNG to pipeline gas competition in Europe or the very vigorous push for LNG as the new bunkering fuel of choice would not bloom out in this intensity.
    Qatar's desire to mask its unhinged portfolio by gorging on the Japanese feast caused the biggest eruption in LNG history. This is how small things can go biblical if only one little Black Swan (Fukushima was not really predictable) materializes and the leading producers is in a tight corner.

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    Nigeria's Buhari meets Niger Delta leaders, militants in Abuja

    Nigeria's President Muhammadu Buhari on Tuesday met leaders from the Niger Delta and representatives of militant groups who have been attacking oil facilities in the region.

    A Reuters reporter saw state governors and traditional rulers from the swamp lands meet Buhari and top security and army officials at the presidential villa in Abuja. A government official said militant groups had also sent representatives.

    There was no immediate word on the outcome of the talks.

    This is Buhari's first meeting with Delta leaders since militants started a wave of attacks on oil pipelines earlier this year to get a greater share of oil revenues.

    The attacks, which put four key export streams under force majeure, led production to plunge to just 1.37 million barrels per day in May, the lowest level since July 1988, according to the International Energy Agency (IEA), from 2.2 million barrels in January 2016.

    Nigeria has held talks for months to end the violence but no lasting ceasefire has been agreed in the oil hub where many complain about poverty, even though the region provides much of Nigeria's oil exports.

    OPEC member Nigeria agreed on a ceasefire with major militant groups in 2009 to end an earlier insurgency. But previously unknown groups have since taken up arms after authorities tried to arrest a former militant leader on corruption charges.

    Under a 2009 amnesty, fighters who lay down their arms receive training and employment. However, of the

    $300 million annual funding set aside for this, much ends up in the pockets of "generals" or officials, analysts say - an endemic problem in a country famous for graft.

    Any ceasefire would be difficult to enforce as the militants are splintered into small groups of angry, young unemployed men even their leaders struggle to control.

    A major group, the Niger Delta Avengers, had initially declared a ceasefire in August but then claimed another attack last month.

    The group has threatened to step up attacks on oil facilities in the Niger Delta if the president pursues a military campaign, its spokesman Mudoch Agbinibo told Reuters in written responses to questions.
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    China's record gasoil exports may have created unforeseen squeeze

    China exported record volumes of gasoil in September, triggering a decline in domestic stocks and leading the market to believe that Asia's biggest oil consumer might have exported more than it should have, and therefore might be forced to limit overseas sales in October.

    September gasoil exports surged to a record high of 1.6 million mt, or 398,197 b/d, surpassing the previous high of 1.53 million mt, or 368,840 b/d, in July, according to data from the General Administration of Customs.

    On a daily average basis in barrels, exports in September were 44.4% higher year on year and up 55.4% month on month.

    "We expect gasoil exports in October to retreat from the highs to just above 1 million mt as good domestic demand is expected to keep the barrels at home," a Beijing-based analyst said.

    Sinopec, China's leading gasoil exporter, was estimated to have exported around 850,000 mt last month from its refineries in the southern and eastern coasts. It was a big jump from an estimated 440,000 mt exported in August.

    PetroChina was estimated to have increased gasoil exports significantly to around 428,000 mt in September from its refineries in northeast China, the southwest Yunnan province, as well as from Guangxi province.

    In August and July, gasoil exports from the regions were 343,000 mt and 385,000 mt, respectively.

    China's gasoil exports are mainly from state-owned refineries under Sinopec, PetroChina, CNOOC and Sinochem, as they are more experienced than the independent refiners in exporting the barrels.

    State-run refiners normally also have less flexibility in their export plans, which are usually made at least one month ahead of loading.

    This plan is seldom changed even if the situation of availability changes quickly.

    "This time, in September, the reason China sent out such big volumes of gasoil was not because of the surplus situation in the domestic market," a Shenzhen-based trader said.

    "High outflows, on the contrary, have created a situation of tight supply within the country."


    China produced 14.38 million mt of gasoil in September, edging down 0.3% from August and 1.4% lower year on year, data from the National Bureau of Statistics showed.

    Chinese refiners have been adjusting their units to maximize gasoline output as part of the country's nationwide drive to increase gasoline production, leading to lower gasoil output.

    "Therefore, gasoil supplies are tight and we now even have to wait for storage sites to be replenished, rather than waiting for storage sites discharging, as we saw in previous months this year," a trader from PetroChina's Guangdong sales arm said.

    "The tightness has encouraged buying since mid-September in the wholesale market. This has pushed up the price of gasoil Yuan 500/mt higher than gasoline. This is a rare market trend this year."

    Gasoil stocks end the of September were down 12.81% month on month, after falling 16.81% a month earlier, according to data from state-owned news agency Xinhua.

    Domestic buying of gasoil in September showed some recovery, buoyed by demand from the land and water transportation sectors.

    A ban on overloading of cargo trucks, which took effect September 21, had significantly raised the mileage needed to transport cargoes and therefore indirectly pushed up gasoil consumption by the commercial transport sector.

    Moreover, activity in the coal market has also increased since last month, requiring more trucks and vessels to ship the material from mines to users.

    In addition, seasonal fishing bans in the Yellow, East China and South China seas were gradually being lifted from August, boosting the fishing industry's demand for marine gasoil.

    Rising domestic wholesale prices were also encouraging local trading houses to rush to the market to secure stocks amid fears that prices could rise even further, an independent trading source said.

    "Stockpiling activity started in September and finished around mid-October," the PetroChina source added.

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    Statoil presents plan for Trestakk discovery (Norway)

    Norwegian oil major Statoil has submitted a Plan for Development and Operation (PDO) of the Trestakk discovery on the Halten Bank to the Norwegian minister for petroleum and energy Tord Lien in Bodø, Norway.

    The discovery, made in 1986, contains about 76 million barrels of recoverable oil equivalent, mainly oil. The project will be tied back to the Åsgard A oil production vessel, with planned production startup anticipated in 2019.

    Trestakk is located in production license PL091, block 6406/3 in the Norwegian Sea some 27 km southeast of Åsgard A platform.

    Statoil said on Tuesday that the capital expenditures for the project development are estimated at approximately 5.5 billion NOK ($667.5 million).

    Torger Rød, head of project development in Statoil, said: “Trestakk is a good example of what is possible to achieve through spending time on working toward the best concept selection.

    “By rethinking our concept along with license partners and suppliers, we have arrived at a solution that costs almost 50 percent less than the original concept. At the same time, we have been able to increase the recoverable resources significantly.”

    The company’s first investment estimates were around 10 billion NOK, which was reduced to 7 billion NOK when the concept selection was made in January 2016.

    Additional improvements and concept adaptations during 2016 further reduced the estimates to about 5.5 billion NOK.

    According to Statoil, the concept selection consists of a template structure and an attached satellite well, which will be tied back to Åsgard A. Three production wells and two gas injection wells will be drilled for a total of five wells.

    Siri Espedal Kindem, senior vice president for operations North in Statoil, said: “Volumes from Trestakk are an important contributor to ensure that operations on the Åsgard A production ship are extended toward 2030 and that more of the original volumes from the Åsgard field can be extracted.”

    Statoil is the operator of the Trestakk discovery with a 59.1 percent interest while the two partners, ExxonMobil Exploration and Production Norway and Eni, have a 33 and 7.9 percent interest respectively.
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    Shell pares back capex, posts profit

    Shell is aiming for the lower end of a previously given guidance on capital expenditure for next year, which will be some $4 billion off this year's expected total.

    The Anglo-Dutch supermajor also ran up a profit in the third quarter as against a hefty loss a year earlier, although revenues sank.

    Shell is looking at full-year organic capex this year of $29 billion - inclusive of $3 billion in non-cash items - which is around $18 billion below the 2014 combined spend of Shell and BG Group, which it acquired.

    For next year capex is seen at around $25 billion - which is right at the bottom of previous guidance of between $25 billion and $30 billion.

    Capex for the third quarter was $7.7 billion and $73 billion for the first nine months of the year - however, $52.9 billion of that related to the BG purchase.

    Net profit for the three months to the end of September was $1.43 billion, a vast improvement on the $7.39 billion loss taken a year earlier.

    Revenues slipped, however, from $68.71 billion to $61.86 billion. This was due to a huge drop in the average realised price of both liquids (11% down) and natural gas (31% down).

    Oil and gas production was, however, up significantly, rising 25% to 3.6 million barrels of oil equivalent per day. A major factor was the integration of BG, which contributed an increase of 806,000 boepd.

    "Excluding the impact of divestments, curtailment and underground storage utilisation at NAM in the Netherlands, a Malaysia PSC expiry, PSC price effects, the Woodside accounting change, and security impacts in Nigeria, third quarter 2016 production increased by 28% compared with the same period last year, or in line with last year excluding BG," Shell said.

    Liquefied natural gas volumes of 7.7 million tonnes were 45% higher, with BG contributing 2.19 million tonnes.
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    BP third quarter profits cut in half but beat forecasts

    Underlying third-quarter profits halved at BPcompared to last year but the fall was not as bad as feared as the oil colossus continues to chip away at costs.

    Although down 49% on last year due to lower oil prices, currency effects and one-off events hitting production levels, underlying replacement cost profits of $933m in the three months to the end of September were well ahead of the consensus forecast of $720m.

    Cost-cutting helped, with cash costs over the past four quarters down $6.1bn compared to two years ago.

    "We continue to make good progress in adapting to the challenging price and margin environment," said chief financial officer Brian Gilvary. "We remain on track to rebalance organic cash flows next year at $50 to $55 a barrel, underpinned by continued strong operating reliability and momentum in resetting costs and capital spending.

    The Brent oil price averaged $46 a barrel in the quarter, compared with $50 a barrel in 3Q 2015, and gas prices outside the US were also weaker. Refining margins were steeply down from a year earlier, depressed by high product stock levels.

    Reported profits were up $1.66bn from $1.23bn a year ago and the FTSE 100 company announced an unchaged quarterly dividend of 10 cents per share, which will be paid on 16 December with the sterling translation to be calculated by 6 December.

    Total production for the quarter was 5.9% lower and underlying production fell 2% to 2,110m barrels of oil equivalent per day, with the main factors being maintenance activities, the impact of weather and the outage from the Pascagoula gas plant fire in the Gulf of Mexico.

    For the first nine months of the year, total and underlying production of 2,209mboe/d was broadly flat versus the same period in 2015.

    Looking to the final quarter of the year, BP said it expected production to be slightly higher than the third quarter, mainly reflecting recovery from planned seasonal turnaround and maintenance activity.

    Expectations for full year organic capital expenditure were reduced to $16bn, compared to original guidance of $17-19bn given at the start of the year. For 2017 guidance is for $15-17bn.

    With $2.7bn of cash divestments over the year to date, gearing at the quarter end was 25.9%.
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    Anadarko Petroleum posts bigger-than-expected loss

    Anadarko Petroleum Corp reported a bigger-than-expected quarterly loss, hurt by lower crude prices, and said it expects to raise more than originally planned through asset sales this year.

    Anadarko increased its full-year asset monetization target for the second time this year, this time to $4 billion from its July forecast of $3.5 billion.

    The company has slashed its 2016 capital spending, cut its dividend, laid off about 1,000 workers and sold assets to cope with a more than 55 percent drop in oil prices since mid-2014.

    The net loss attributable to Anadarko narrowed to $830 million, or $1.61 per share, in the third quarter, from $2.24 billion, or $4.41 per share, a year earlier.

    Excluding items, the company lost 89 cents per share, much more than analysts average estimate of 57 cents, according to Thomson Reuters I/B/E/S.

    Anadarko's revenue rose 12.1 percent to about $1.89 billion in the three months ended Sept. 30, also missing analysts' estimates of $2.19 billion.
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    Nigerian Oil Pipeline Hit By Fresh Violence In Niger Delta

    An oil workers’ representative said on Monday that there was another attack on an oil pipeline in the Niger Delta, which a fairly new militant group had claimed on Saturday.

    The Niger Delta Greenland Justice Mandate group claimed that it had attacked the Efurun-Otor pipeline in the in the Urhobo region, operated by the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC).

    “Although the pipeline was not in use at the time of attack, NPDC periodically makes use of it and it is a major carrier of their product from (oil mining lease) OML 34 to OML 65,” Lucky Sorue, head of oil and gas workers in the Urhobo region, said on Monday, as quoted by Reuters.

    The Niger Delta Greenland Justice Mandate became notorious in August when it started blowing up pipelines earlier that same month. The Greenland group has been targeting NPDC installations because these are the only installations in the area where the Greenland group operates. That group, which is not affiliated in any way to the most notorious militants, the Niger Delta Avengers (NDA), had not taken part in the ceasefire that the NDA had vowed to keep.

    Last week, however, just as Nigeria said that its oil production had increased to 1.9 million barrels per day, from the 1.3 million bpd it produced in the spring of 2016, the NDA targeted Chevron’s offshore export pipeline at Escravos. The sharp drop in Nigeria’s daily crude oil output had been courtesy of (mostly) the NDA militants targeting oil infrastructure in the Niger Delta. Before the militant attacks started a couple of years ago, OPEC member Nigeria was pumping 2.2 million bpd.

    Due to the violence that has crippled Nigeria’s oil production, OPEC has generally agreed that the country, alongside Libya and Iran, would be given a pass when the cartel discusses production cuts to fit its total production within the tentative 32.5 million bpd-33 million bpd limit it is currently trying to negotiate.
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    Suncor Energy Inc sells lubricants unit to HollyFrontier Corp for $1.13 billion

    U.S. oil refiner HollyFrontier Corp said on Monday it would buy Suncor Energy Inc’s Petro-Canada lubricants unit for $1.13 billion, expanding its North American lubricants business.

    HollyFrontier will become the fourth-largest lubricants producer in North America with a capacity of 28,000 barrels per day, or about 10 per cent of North American production, the oil refiner said.

    Petro-Canada is the world’s largest manufacturer of white mineral oil, which is used in health and beauty products, pharmaceuticals, adhesives, plastics and elastomers. It purchased its lubricants business from Gulf Canada in 1985.

    Suncor, Canada’s biggest energy company, merged with Petro-Canada in 2009.

    Reuters reported last week, citing sources, that HollyFrontier was in advanced talks to acquire Suncor’s Petro-Canada lubricants division for a little over $1 billion, after submitting the highest bid in an auction.

    The deal, which includes working capital of about $342 million, will immediately add to HollyFrontier’s earnings per share and cash flow, the company said.

    HollyFrontier said it would fund the deal, expected to close in the first quarter of 2017, with a combination of debt and cash on hand.
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    ConocoPhillips advances deepwater exploration exit with Senegal assets sale completion

    ConocoPhillips has completed a transaction for the sale of its shares in ConocoPhillips Senegal BV, which holds a 35 percent interest in three exploration blocks offshore Senegal, to Australia’s Woodside Petroleum.

    ConocoPhillips said on Friday that the total sales price of the transaction between its subsidiary and Woodside was around $440 million, including net customary adjustments of approximately $90 million.

    To remind, the two companies agreed in July that Woodside would buy all of ConocoPhillips’ interests in Senegal, based on an effective date of January 1, 2016.

    Matt Fox, executive vice president for Strategy, Exploration, and Technology at ConocoPhillips, said: “We are pleased to complete this transaction with Woodside. We experienced a transparent and cooperative relationship with the Senegalese government and appreciated their support throughout a very successful exploration and appraisal campaign.

    “By completing this sale we are progressing our broader exit from deepwater exploration, which will further increase our capital flexibility and reduce the cost of supply of our portfolio.”

    The three offshore exploration blocks, Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore, had a net carrying value of approximately $285 million as of Sept. 30, 2016.

    With the acquisition of ConocoPhillips’ Senegal assets, Woodside will get access to the SNE and FAN deep-water oil discoveries. SNE is one of the largest global deepwater oil discoveries since 2014. Woodside estimates that the SNE discovery contains 560 MMbbl of recoverable oil (at the 2C confidence level, 100%).

    Partners in the exploration blocks are Cairn Energy, FAR Limited, and Petrosen, the Senegal National Oil Company.
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    Iran eyes new crude oil buyers, Asia remains linchpin

    Iran continues its quest for new crude buyers, especially in Europe, but its loyal customer base will continue to hinge on countries like India and China, whose demand for Iranian crude has observed a steady rise this year.

    Iran has found interest for its crude in some unusual places in the past few months as it continues it diversify its list of buyers. Earlier this month it agreed to sell 1 million barrels of crude oil to Hungary via Croatia as it seeks to widen its post-sanctions customer base, which now includes cargoes sold to oil major BP, France's Total, Greece's Hellenic Petroleum, Spain's Repsol and Cepsa, Russia's Lukoil, Poland's Grupa Lotos, Portugal's Petrogal and Italy's Saras and Iplom.

    Iran said it has held talks with Bosnia and Herzegovina this week as it hopes to expand its list of crude oil export destinations. However, its shipments to Asia remain the pillar of its export market.

    In September, total estimated export volumes of crude and condensate on VLCCs, Suezmaxes and Aframaxes from Iran's crude and condensate ports jumped to 2.49 million b/d from 2.42 million b/d in August.

    This sharp rise was driven by a heavier Iranian Heavy export program, sources said.

    Exports to Asia accounted for 79%, or some 1.72 million b/d, of total outflows, marking a fall of around 300,000 b/d from August.

    Despite the slight fall, Asia remains its premier market with China and India buying almost 50% of Iranian crude last month.

    India was the largest buyer of Iranian crude last month, totaling 602,456 b/d, up from 458,880 b/d in August

    India's thirst for Iranian crude has intensified this year, with its estimated share of market volume for September rising to 25% from 19% in August.

    India's Oil Ministry recently said it received its first consignment of 260,000 mt of Iranian crude for its strategic reserves on the west coast in mid-October.

    State-run Mangalore Refinery and Petrochemicals Ltd. received almost 2 million barrels of a variety of Iranian crude grades at the strategic crude oil storage facility at Mangalore, which has a capacity of 11 million barrels.

    Around 5.5 million-6 million barrels of storage at the Mangalore facility is to be filled with Iranian crude.

    The other two strategic reserve sites are at Visakhapatnam on the east coast, with capacity of 9.75 million barrels, and Padur in southern India's Kerala, which will have the highest capacity of around 18.33 million barrels when it becomes operational by the end of this year.
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    Angola LNG production halted

    Angola LNG has suspended production at its 5.2 million tons per year liquefaction plant in Soyo as it is conducting a planned shutdown for a “minor intervention”, an Angola LNG spokeswoman confirmed to LNG World News on Monday.

    Production of the chilled fuel is expected to resume during the month of November, the spokeswoman said in an emailed statement.

    To remind, the $10 billion Angola LNG project, led by U.S. energy giant Chevron, restarted operations in May this year after it was closed for more than two years due to a major rupture on a flare line that occurred in April 2014.

    The facility was shut down again in July this year as part of the restart and commissioning programme and came back online in September.

    Since the May restart, the Angola LNG project shipped 8 cargoes of LNG and 16 LPG cargoes, Chevron chief financial officer Pat Yarrington told analysts on Friday after the company announced its third-quarter results.

    According to Yarrington, the plant reached a rate of approximately 5 mtpa of LNG prior to the latest shutdown.

    “Short duration shutdowns are often experienced as facilities are ramped up to their full capacity. ALNG expects to restart the plant within the next couple of weeks and will continue to ramp up and fine-tune the system,” she added.

    Angola LNG is a joint venture between Sonangol (22.8%), Chevron (36.4%), BP (13.6%), Eni (13.6%), and Total (13.6%).
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    Genscape: Cushing inventory

    Genscape Cushing inv +585K for week ended 10/28

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    Interest in latest UK oil exploration tender lowest in 14 years

    Britain's latest tender for offshore exploration permits attracted the lowest interest in 14 years, underlining how the mature North Sea is struggling to entice explorers to extract the 20 billion barrels of oil equivalent left untapped.

    The 29th round for offshore licences, which included unexplored areas around the Shetlands, received only 29 applications for 113 blocks, compared with 1,261 blocks on offer, Britain's Oil and Gas Authority (OGA) said on Monday.

    "Long standing investors continue to seek new acreage and we also welcome the arrival of new entrants," OGA Chief Executive Andy Samuel said in a statement.

    A total of 24 companies submitted applications, including multinationals and first-time applicants, the OGA said.

    The total of applications received was the lowest since 2002, however, when just 289 blocks were on offer.

    Oil companies across the globe have severely cut back spending on exploration as weak prices have squeezed cashflow.

    Aware of tighter budgets, the OGA reduced licence-related rental fees by up to 90 percent in the latest round, which closed on Oct. 26, and offered more flexibility in terms of when explorers can carry out certain work programmes.

    The hunt for new oil and gas fields in the British part of the North Sea is expected to fall this year to the lowest since the early 1970s when North Sea oil and gas extraction first took off.

    Attached Files
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    CONSOL, Noble Energy to separate Marcellus shale joint venture

    The two companies have negotiated a separation of the JV that was formed in 2011 for the exploration, development and operation of primarily Marcellus shale properties in Pennsylvania and West Virginia. Highlights of the agreement include:

    Each party will own and operate a 100% interest in its properties and wells in two separate operating areas. Each party will have independent control and flexibility with respect to the scope and timing of future development over its operating area.
    All acreage operated by CONSOL Energy and Noble Energy in their respective operating areas will remain fully dedicated to CONE Midstream Partners.

    "This agreement with Noble Energy to separate our JV is bitter sweet for CONSOL Energy," commented Nicholas J. DeIuliis, president and CEO. "Noble has been a top-notch partner, and we have enjoyed the collaborative relationship that we have shared over the past five years. Even though we have seen much success together, we have agreed that we must both have the ability to adapt to a changing energy landscape. The separation of the JV is consistent with CONSOL's transitional journey to a pure-play exploration and development company, and the company's commitment to future growth, in what is now a more robust and actionable stacked pay opportunity set."

    David L. Stover, chairman, president and CEO of Noble Energy, added, "The accomplishments of our JV over the last five years are outstanding, including significant increases in combined production and recoverable resources. These outcomes are a direct result of the high-quality nature of the acreage, but even more so a result of the combined technical leadership and coordination between our two companies. Today's agreement between CONSOL Energy and Noble sets a clear path for both companies into the future. It provides us with greater control and flexibility over the future pace of development in the Marcellus."

    Prior to the agreement, the JV collectively operated approximately 669,000 Marcellus acres. CONSOL Energy and Noble Energy each held a 50% working interest. As of the effective date of the agreement on Oct. 1, 2016, total flowing production to the JV was 1.07 Bcfd of natural gas equivalents.

    Subsequent to closing of the agreement, the acreage and production of the prior JV will be as follows:

    CONSOL Energy will operate a 100% working interest in approximately 306,000 Marcellus acres with associated production of approximately 620 MMcfd of natural gas equivalents. The majority of the acreage operated by CONSOL Energy resides in Pennsylvania.
    Noble Energy will operate a 100% working interest in approximately 363,000 Marcellus acres with associated production of approximately 450 MMcfd of natural gas equivalents. The majority of the acreage operated by Noble Energy resides in West Virginia.

    In addition to the acreage and production realignment between the two companies, Noble Energy will also remit a cash payment of approximately $205 million to CONSOL Energy at closing. The exchange of properties and cash result in the elimination of the remaining outstanding carry cost obligation due from Noble Energy to CONSOL Energy.

    While the exchange agreement creates independent ownership interests in the acreage and production currently gathered by CONE, it does not change the total acreage dedicated to CONE, the gathering rates, or other fundamental terms for the services provided by CONE. CONSOL Energy and Noble Energy remain as co-sponsors of CONE and shippers on CONE's gathering systems, while retaining their respective general partnership and limited partner ownership interests in CONE.

    The agreement is expected to close in the fourth quarter.
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    Iran floating storage rises


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    Indonesia offers three unconventional oil and gas blocks - official

    Indonesia is offering three new unconventional oil and gas blocks on the islands of Sumatra and Kalimantan to potential bidders, an energy ministry official said on Monday.

    The assets on offer are one shale gas block in East Kalimantan, with potential resources of 7 trillion cubic feet of gas and 21 million barrels of oil, as well as two coalbed methane blocks in South Sumatra.

    Bidders can propose a production split or make an upfront payment for the right to develop the block, Tunggal, an upstream director at the directorate-general of oil and gas who goes by one name, told reporters.

    Attached Files
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    Saudi Aramco, Nabors ink onshore rig agreement

    Nabors Industries has announced the signing of an agreement to form a new joint venture (JV) in the Kingdom of Saudi Arabia to own, manage and operate onshore drilling rigs. The JV, which will be equally owned by Saudi Aramco and Nabors, is anticipated to be formed and commence operations in the second quarter of 2017.

    As part of its commitment to developing a competitive Saudi energy sector, Saudi Aramco has sought to localize industry hubs in order to foster economic diversification and job creation. This JV is one of the anchor projects that has grown out of this strategy, which supports the wider development and localization of industries such as rig and rig equipment manufacturing and casting and forging.

    The JV will leverage Nabors' established business in Saudi Arabia to begin operations, with a focus on Saudi Arabia's existing and future onshore oil and gas fields. Saudi Aramco and Nabors will each contribute land rigs to the JV in the first years of operation along with capital commitments toward future onshore drilling rigs, which will be manufactured in Saudi Arabia.

    Nabors Chairman, President and CEO, Anthony G. Petrello, said, "Nabors has had a decades-long and a mutually beneficial relationship with Saudi Aramco. We welcome this opportunity to expand that relationship, extend our commitment to the Kingdom, and create a long-term, profitable growth partnership with high skills career opportunities for Saudi employees. This venture represents a new chapter in the operator-contractor relationship. We fully expect the venture's shared interest and collaborative efforts to result in even higher levels of safety and efficiency, while enhancing Saudi Aramco's well productivity and cost savings."
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    G.E. to Combine Oil and Gas Business With Baker Hughes

    General Electric said on Monday that it would combine its oil and gas business with Baker Hughes, looking to increase its scale to battle the effects of a prolonged slump in oil prices that has eaten into results and prompted job cuts across the petroleum sector.

    The new company, which G.E. referred to as the “new” Baker Hughes, would be one of the world’s largest providers of equipment, technology and services to the oil and gas industry. In 2015, the businesses had $32 billion in revenue, and operations in more than 120 countries. It also would be better able to compete with Schlumberger and other oil services companies.

    Oversupply in the oil industry has sapped prices in the past two years, and there is little expectation that prices will rise much more before the end of the year. But expectations that the Organization of the Petroleum Exporting Countries cartel could freeze or cut production has helped send prices higher recently.

    The deal came after Baker Hughes and Halliburton called off a $35 billion merger in May, following a lengthy regulatory review and a lawsuit by the Justice Department to block the transaction on antitrust grounds.

    After the deal, G.E. would own 62.5 percent of Baker Hughes. Shareholders of Baker Hughes would own the rest.

    “This transaction creates an industry leader, one that is ideally positioned to grow in any market,” Jeffrey R. Immelt, the G.E. chairman and chief executive, said in a news release. “Oil and gas customers demand more productive solutions.’’

    Under the terms of the deal, Baker Hughes shareholders would receive a one-time cash dividend of $17.50 a share. The dividend would be funded by $7.4 billion contributed by G.E.

    The transaction is subject to approval by regulators and Baker Hughes shareholders. It is expected to close in mid-2017.

    It would be structured as a partnership with G.E. and Baker Hughes each contributing assets to the new company and G.E. holding a controlling stake.

    The combined company would have headquarters in Houston and London, with Mr. Immelt serving as chairman and Lorenzo Simonelli, the president and chief executive of the unit G.E. Oil & Gas, serving as president and chief executive.

    Martin Craighead, the Baker Hughes chairman and chief executive, would serve as vice chairman. The new Baker Hughes board would have nine directors, with five from G.E., including Mr. Immelt.
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    General Electric is close to a near-$30 billion deal with Baker Hughes

    General Electric Co is nearing an about $30 billion deal to merge its oil and gas business with Baker Hughes Inc., the Wall Street Journal reported on Sunday.

    The combined entity will be controlled by GE and would have publicly traded shares, the Journal reported, citing people familiar with the matter.

    The deal is to be announced on Monday, the Journal said.

    GE said in a statement last week that it was in talks with the oilfield services provider on potential partnerships but none of those options included an outright purchase.

    Baker Hughes' planned merger with bigger rival Halliburton Co.  fell through in May due to opposition from regulators.

    A partnership with Baker Hughes could help GE to transform its oil and gas division and emerge a larger player in the sector to better compete with oilfield services leader Schlumberger.

    Also, this partnership could give Baker Hughes a chance to redefine itself following the failed merger.

    GE to combine Oil and Gas business with Baker Hughes, GE to own 62.5% of new Baker Hughes

    Attached Files
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    Libya Crude Oil Production Rises

    Libya Crude Oil Production Rises to 640k B/D: NOC Official

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    Iraq Reveals Oilfields Output to Win Over OPEC Ahead of Meeting

    Iraq published data showing a rare level of detail for its oil production and exports, a week after inviting energy reporters to Baghdad to make a case that the country is pumping more crude than analysts and OPEC acknowledge.

    The country’s state oil marketing agency released a statement on Sunday showing September production figures for each of the 26 fields it controls, plus a single output figure for the semi-autonomous Kurdish region, which manages its crude independently. Previous monthly statements showed just two figures: total production and total exports. The Oil Marketing Co., known as SOMO, also provided detailed data on exports and domestic consumption.

    OPEC’s second-largest producer says it pumped more than 4.7 million barrels a day last month, several hundred thousand barrels a day more than oil-industry watchers recognize. The Organization of Petroleum Exporting Countries assesses output for its 14 members based on such secondary sources. Iraq wants the group to accept the ministry’s figures before a Nov. 30 meeting at which OPEC could limit production for its members.

    Oil Minister Jabbar al-Luaibi complained about OPEC data at a meeting in September in Algiers. He adopted a milder approach last week, inviting reporters to Baghdad for a tour of the national museum and a detailed discussion of production figures. “We want you to see for yourselves what our production is,” he said on Oct. 23.

    Transparency Push

    The field-specific data for September sheds light on how SOMO calculates Iraqi production. However, it doesn’t provide a breakdown of Kurdish production, which accounts for much of the difference between the data cited by SOMO and secondary sources.

    “It’s an effort of transparency and backing up their numbers, but I’m not quite sure how effective it’s going to be,” Robin Mills, chief executive officer of consultant Qamar Energy, said by phone from Dubai. “The biggest discrepancy is likely to be in the Kurdish fields.”

    Production from the Kurdish enclave in northern Iraq averaged 546,000 barrels a day last month, according to SOMO. That figure is an estimate because the central government has not received the latest production data from Kurdish authorities, SOMO Director General Falah Al-Amri said last week. SOMO bases its estimate on what Kurdish production was in 2013 and 2014, he said.

    In the north of the country, the Kirkuk and Baba Gurgur fields produced 93,000 barrels a day for the federal North Oil Co., SOMO said. The nearby Bai Hasan and Avana fields pumped 275,000 barrels a day for the NOC.

    The BP Plc-operated Rumaila oil field, Iraq’s largest, pumped an average of 1.4 million barrels a day in September, SOMO said. The two fields at West Qurna produced a combined 870,000 barrels a day, while output from Zubair was 390,000; Majnoon, 214,000; and Halfaya, 204,000.
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    EU confirms to lift cap on Gazprom's use of Russia's Nord Stream pipeline link

    The European Commission confirmed on Friday it had lifted limits on Gazprom's use of a key link from its offshore Nord Stream pipeline to Germany, allowing Russia to pump more gas supplies to Europe bypassing traditional routes via Ukraine.

    The decision allows Gazprom to bid for an additional 7.7 and 10.2 billion cubic meters (bcm) more volumes at auction on top of its existing access to half of the Opal pipeline's capacity, a Commission official said.

    As Reuters exclusively reported, it requires at least 10 percent and as much as 20 percent of capacity be made available to other suppliers. If there is no demand, Gazprom would then also be allowed to bid for those volumes as well.

    The Commission's decision modifies a proposal by German regulators in May that would have given Gazprom almost full access to the pipeline, with only between 4 and 8 percent reserves for rivals.

    "The European Commission has today adopted stricter exemption conditions for the operation of the Opal gas pipeline," it said in a statement.

    Under an EU ruling to prevent energy suppliers from dominating infrastructure, Gazprom has only been allowed to use 50 percent of Opal, which provides a land link from Russia's undersea Nord Stream pipeline to Germany and the Czech Republic.

    A condition for Gazprom to have full access to Opal, under the earlier exemption, was for it to implement a gas release program for 3 bcm.
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    Gas drillers send six more rigs to patch; Oil loses two

    The number of oil rigs in U.S. fields fell by two this week, the first decline in 18 weeks, the Houston oilfield services company Baker Hughes reported Friday. At the same time, U.S. gas drillers collectively sent six more rigs to the patch.

    The total rig count climbed to 557, up from a low of 404 in May, the eighth collective rise in 10 weeks. Totals still lag the same period last year, when 775 drilling rigs were operating in U.S. oil and gas fields.

    This week, the number of active oil rigs fell two to 441. Gas rigs rose six to 114. The number of offshore rigs slipped one to 22.

    Drillers operated 256 rigs in Texas, up two from the week prior. North Dakota added five, Pennsylvania two, Wyoming one. Colorado lost two; New Mexico, three.

    Drilling activity has followed the modest rebound in prices, from February’s low of about $26 a barrel to more than $50 over the past week.
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    Oil Extends Decline as OPEC Splits Prevent Deal to Curb Supply

    Oil declined for a second day as OPEC’s internal disagreements undermined efforts among major suppliers to reach an agreement in Vienna on trimming output to support prices.

    Futures fell as much as 1.1 percent in New York after sliding 2.1 percent at the end of last week. The Organization of Petroleum Exporting Countries ended a meeting on Friday without reaching a deal on country quotas, according to delegates who took part in the discussions. Non-OPEC nations finished talks with the group on Saturday without any supply commitments, Brazil’s Oil and Gas Secretary Marcio Felix said. Brazil attended as an observer.

    Oil has fluctuated near $50 a barrel amid uncertainty over whether OPEC can implement the first supply cuts in eight years at its official November meeting. As the gathering opened in Vienna last week, OPEC Secretary-General Mohammed Barkindo warned of the consequences if producers don’t follow through on an agreement to reduce output. The price recovery has already taken far too long and suppliers can’t risk delaying it further, he said.

    “Talks over the weekend make it seem less likely there will be an agreement on production cuts,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The market has probably made a fair bit of the adjustment, but I wouldn’t be surprised to see oil fall further into the $47 range.”

    OPEC agreed in Algiers last month to trim output to a range of 32.5 million to 33 million barrels a day and is due to finalize the deal at its Nov. 30 summit in Vienna. The accord helped push prices to a 15-month high above $50 a barrel earlier this month, although they have subsequently fallen amid doubts the group will follow through on the pledge. More than 18 hours of talks over two days in the Austrian capital this weekend yielded little more than a promise that the world’s largest producers would keep on talking.

    Some progress was made at the Friday meeting on the methodology to be used for allocating output quotas to OPEC members, said one delegate, who asked not to be identified because the talks were private. Russia reiterated that it’s willing to freeze production, rather than cut, but only if there is an OPEC agreement first, according to participants in Saturday’s meeting.
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    Chevron earnings beat big, trouncing estimates by 31 cents a share

    "We have made progress toward our goals of lowering the cash breakeven in our upstream business and getting cash balanced," Chairman and CEO John Watson said in a statement. "Capital spending and operating and administrative expenses have been reduced by over $10 billion from the first nine months of 2015 as a result of a series of deliberate actions we have taken."

    The oil company reported third-quarter earnings of $1.3 billion, or 68 cents a share, on revenues of $30.14 billion. That profit was down 37 percent from a year ago, when Chevron reported earnings of $2 billion, or $1.09 a share, on revenue of $34.3 billion.

    Analyst had forecast earnings of 37 cents on revenue of $30.3 billion.

    Chevron has reduced capital spending and expenditures on exploration by about $8 billion year to date. Spending on upstream exploration and production operations accounted for 91 percent of all expenditures in the third quarter.

    Production of oil, natural gas and other fossil fuels ticked down slightly from a year ago. Chevron narrowed its loss in its U.S. upstream business by nearly $400 million due to lower expenses and taxes. The loss was offset by a profit of $666 million in Chevron's international drilling segment, which was up slightly from a year ago.

    Earnings in Chevron's U.S. downstream business — which includes refining fuels and products that are marketed to consumers — fell by $727 million from a year ago due to lower margins for refined products. Integrated oil companies such as Chevron have seen their refining margins contract as crude oil prices rise. Crude is the raw material for many fuels.

    On Wednesday, Chevron raised its quarterly dividend by a penny to $1.08 a share.

    One day earlier, a militant group known as the Niger Delta Avengers claimed responsibility for an attack on a pipeline to the Escravos offshore terminal operated by a Chevron subsidiary. Chevron briefly closed the facility in the spring due to militancy Nigeria's restive southern delta region. The company declined to comment.

    Chevron is better-positioned than its larger U.S.-peer ExxonMobil to reap upside from rising oil prices, but a number of large-cap exploration and production companies are likely to outperform both majors, analysts told CNBC's "Power Lunch" on Thursday.

    "We think that Chevron just has too much risk right now. It's trying to balance pretty … hefty dividend spending, along with trying to streamline the company, along with trying to grow production. We're worried that production is eventually going to turn into a shortfall," CFRA energy analyst Stewart Glickman said.

    Last quarter, a group of integrated oil companies led by Chevron announced it would invest $36.8 billion in a project that will boost production at Kazakhstan's Tengiz field, marking one of the largest investment decisions since the beginning of the oil price downturn.

    Chevron has flagged a US$5 billion cost blowout at the under-construction Wheatstone gas-export facility, a further blow after the overrun and delays seen at the energy company's other large gas project in Western Australia.

    Read more:

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    PetroChina Profit Slumps as Gas Earnings Follow Oil’s Slide

    PetroChina Co. posted a 77 percent decline in third-quarter profit as a suppressed international oil market and lower domestic natural gas prices eroded earnings at the country’s biggest producer.

    Net income fell to 1.2 billion yuan ($177 million) in the July-September period, the Beijing-based company said in a statementto the Hong Kong stock exchange on Friday. Higher earnings from refining and chemicals were overwhelmed by losses on production and weaker performance from its natural gas and pipelines units. Revenue dropped 3.8 percent to 411.4 billion yuan.

    “PetroChina has done a good job controlling costs and managed to get a small profit despite lower crude prices in the third quarter,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Oil prices should be significantly higher in the fourth quarter, which will help improve PetroChina’s profit in the winter, especially if the government raises natural gas prices.”

    The state-owned company dominates the oil and gas industry of the world’s largest energy consumer. It pumps more crude than its domestic rivals, China Petroleum and Chemical Corp. and Cnooc Ltd., and is the country’s second-biggest refiner. It imports the bulk of the country’s natural gas and operates a pipeline system that stretches from China’s western borders with Central Asian nations to the population centers along the east coast.

    During the third quarter, the company swung to an operating loss of 1.5 billion yuan from exploration and production, according to Bloomberg calculations based on the company’s half-year and nine-month data. PetroChina doesn’t release third-quarter operational figures. Earnings from natural gas and pipeline operations fell 39 percent to 6.4 billion yuan, while refining, chemicals and marketing surged to a 9 billion yuan gain from a 5.4 billion yuan loss a year ago, Bloomberg calculations showed.

    ‘Decrease Substantially’

    As the country’s largest natural gas producer and distributor, the company is vulnerable to changes in government-set prices. The administration of President Xi Jinping cut prices twice last year in an effort to encourage consumption, most-recently in Novemberwhen they were lowered by roughly one-quarter.

    PetroChina, which posted its first-ever quarterly loss in the January-March period this year, barely managed to break even in the first half of the year even after booking a 24.5 billion yuan one-off gain from pipeline sales. Net income during the first nine months of the year fell 94 percent to 1.73 billion yuan, the company said Friday. Full-year results are expected to “decrease substantially” from 2015, it said in the statement.

    Brent oil, the global oil benchmark, averaged about $47 a barrel during the third quarter, down roughly 8 percent from the same period a year ago. PetroChina in August cut its domestic crude output target for this year to 103 million tons (about 755 million barrels), from 106 million tons set at the beginning of the year, as it shut some high-cost fields.

    Sliding Output

    Total oil and gas production in the third quarter dropped about 4 percent from the same period last year to 353 million barrels of oil equivalent, according to Bloomberg calculations. The company refined 224.5 million barrels of crude, down 8.7 percent from a year ago.

    China’s total crude output fell 6.1 percent in the first nine months of the year, helping spur record-high imports as the country’s reliance on overseas supply rises. Output by the world’s biggest consumer after the U.S. will stabilize with prices around $50 a barrel and may not rebound until they are above $60, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, said earlier this month.

    PetroChina’s domestic crude production in the third quarter slid almost 7 percent at 189.9 million barrels, Bloomberg calculations showed, while production during the first nine months of the year totaled 575 million barrels, down 5.1 percent.

    Capital expenditures during the third quarter dropped 27 percent to 63 billion yuan, according to Bloomberg calculations. Spending during the first three quarters totaled 114 billion yuan, down 23 percent from the same period last year, according to the statement Friday. Lifting costs during the nine-month period were down 9.9 percent to $11.56 a barrel, while the company’s realized oil price during that period was down 30 percent at $35.79 a barrel, it said in filing Friday.

    PetroChina shares fell 0.6 percent to HK$5.38 before the release of its earnings. The stock has gained 5.9 percent this year, compared with a 4.8 percent rise in the city’s benchmark Hang Seng Index.

    China Petroleum, known as Sinopec, said Thursday that third-quarter profit rose sixfold to 10.2 billion yuan as refining gains helped overcome deepening losses from oil and gas production. Cnooc, China’s biggest offshore oil and gas producer, reported Wednesday a 15 percent fall in third-quarter sales as output and capital spending declined.
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    India Scours Globe for Bargain LNG as Domestic Plants Idle

    India is scouting for new liquefied natural gas contracts globally as part of a push to secure cheap supplies for its under-utilized gas-fired power plants.

    Australia, Qatar and Iran could all act as potential suppliers of long-term LNG contracts, Power Minister Piyush Goyal said in Sydney on Thursday. The global search for LNG comes as India’s gas-fired plants, which can generate nearly 25 gigawatts of power, run at less than a quarter of their capacity because of a shortage of the fuel at affordable prices.

    “I think gas needs to be between $5 and $5.50 landed at my power plant. That is what I’m looking for in the medium- to long-term,” Goyal said in an interview. “Otherwise I won’t be able to start those gas plants.”

    NTPC Ltd., India’s biggest power producer, is said to be seeking to terminate a long-term supply contract for LNG because the fuel is too expensive to be used in power generation. That highlights the country’s difficulty in switching from coal to natural gas for power generation, undermining Prime Minister Narendra Modi’s efforts to cut carbon emissions and promote clean energy.

    “As of now I don’t have any credible offer on the table but I’m fairly confident from talking to people across the world that if not Australia, maybe Qatar will give it to me, or Iran might be able to get me something,” Goyal said. “I’ll go to Europe next week to discuss the same thing. I am sure I’ll find a seller.”

    Energy consultant Wood Mackenzie Ltd. said India may struggle to attract the interest of LNG producers at those prices.

    Australia Investments

    “From a LNG producers perspective, India has always been seen as a very price sensitive buyer and not a premium buyer like Japan, Korea or Taiwan,” said Saul Kavonic, an analyst at Wood Mackenzie. “It is a struggle to see why producers would want to lock in such a low price.”

    Spot LNG in Singapore rose to $6.542 per million British thermal units this week, the highest since December, according to the Singapore Exchange Ltd. Prices are up more than 65 percent from a low in April.

    India is also targeting investments in Australian LNG projects and coking coal mines to secure fresh sources of supply, Goyal said.

    “We could buy stakes, we could buy the whole LNG plant itself, we could look at coal mines,” Goyal said.

    Petronet LNG Ltd., India’s biggest LNG importer, signed a pactwith Exxon Mobil Corp. in 2009 for supply of 1.5 million tons of the super-chilled fuel for 20 years from the Gorgon LNG project in Australia. Supplies are expected to begin next month.

    Goyal also expects Indian companies to boost their investments in Australia despite delays to Adani Enterprises Ltd.’s Carmichael mine in Queensland, which was hampered by environmental protests. The Queensland government earlier this month invoked special powers to accelerate the project.
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    OPEC Exports!


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    ExxonMobil Earns $2.7 Billion in Third Quarter of 2016

    Exxon Mobil Corporation (NYSE:XOM) today announced estimated third quarter 2016 earnings of $2.7 billion, or $0.63 per diluted share, compared with $4.2 billion a year earlier. Results reflect lower refining margins and commodity prices.

    “ExxonMobil’s integrated business continues to deliver solid results,” said Rex W. Tillerson, chairman and chief executive officer. “While the operating environment remains challenging, the company continues to focus on capturing efficiencies, advancing strategic investments, and creating long-term shareholder value.”

    During the quarter, Upstream earnings were $620 million. Volumes for the quarter declined 3 percent to 3.8 million oil-equivalent barrels per day compared with a year ago, due to unplanned downtime, primarily in Nigeria, and field decline partially offset by increased production from recent project start-ups.

    Third quarter Chemical earnings of $1.2 billion, comparable with prior year results, reflect higher maintenance costs, partially offset by increased specialty product sales. Downstream earnings declined to $1.2 billion primarily due to weaker refining margins.

    During the quarter, capital and exploration expenses were reduced by 45 percent to $4.2 billion.

    The corporation distributed $3.1 billion in dividends to shareholders in the third quarter.

    Third Quarter 2016 Highlights

    •Earnings of $2.7 billion decreased $1.6 billion, or 38 percent, from the third quarter of 2015.
    •Earnings per share assuming dilution were $0.63.
    •Cash flow from operations and asset sales was $6.3 billion, including proceeds associated with asset sales of $1 billion.
    •Capital and exploration expenditures were $4.2 billion, down 45 percent from the third quarter of 2015.
    •Oil-equivalent production was 3.8 million oil-equivalent barrels per day, with liquids down 5.1 percent and natural gas up 0.8 percent.
    •The corporation distributed $3.1 billion in dividends to shareholders.
    •Dividends per share of $0.75 increased 2.7 percent compared with the third quarter of 2015.
    •ExxonMobil and InterOil Corporation announced an agreed transaction worth more than $2.5 billion, under which ExxonMobil will acquire all of the outstanding shares of InterOil. The acquisition will give ExxonMobil access to InterOil’s resource base, which includes interests in six licenses in Papua New Guinea covering about four million acres. The transaction is pending the outcome of a shareholder appeal of the court decision approving the transaction.
    •ExxonMobil Kazakhstan Ventures Inc., a 25 percent shareholder in Tengizchevroil LLP, has approved the final investment decision for the Future Growth and Wellhead Pressure Management Project as part of the next expansion phase of the Tengiz oil field.
    •In Guyana, the Liza-3 appraisal well was successfully completed in October, confirming a world-class resource discovery in excess of 1 billion oil-equivalent barrels. Also in October, the Owowo-3 exploration well, located offshore Nigeria, confirmed a discovery of 500 million to 1 billion barrels of oil.
    •ExxonMobil announced plans to increase production of ultra-low sulfur fuels at the Beaumont, Texas, refinery by approximately 40,000 barrels per day. The new unit will use proprietary technology to remove sulfur while minimizing octane loss, and will ensure gasoline meets the latest environmental standards.
    •The company announced plans to expand its specialty elastomers plant in Newport, Wales. The project is expected to be completed in late 2017 and will result in a 25 percent increase in global capacity to manufacture Santoprene thermoplastic vulcanizate, high-performance elastomers used for automotive, industrial and consumer applications.
    •ExxonMobil and Saudi Basic Industries Corporation (SABIC) are considering the potential development of a jointly owned petrochemical complex on the U.S. Gulf Coast. The project would include a steam cracker and derivative units, and would be located in Texas or Louisiana near natural gas feedstock. A final investment decision will be made upon completion of necessary studies.
    •During the quarter, the company announced new developments in its relationships with the Georgia Institute of Technology, Princeton University and the University of Texas at Austin to pursue technologies to help meet growing energy demand while reducing environmental impacts and the risk of climate change.
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    Inpex Hits Gas Offshore Japan

    Inpex Corporation announced Friday that gas has been found at an exploration well offshore the Shimane and Yamaguchi prefectures in Japan.

    Drilling operations, which began on June 5, consisted of drilling to a depth of 9,514 feet below the sea floor at a location approximately 80 miles northwest of Shimane Prefecture and approximately 86 miles north of Yamaguchi Prefecture.

    These operations resulted in the discovery of a thin gas reservoir in a shallow zone, as well as some gas indications in deeper zones. Inpex also said that it encountered unexpected, strong gas indications suggesting the presence of a high pressure gas column in the deepest zone.

    Based on the findings of a gas reservoir in the shallow zone and gas indications in the deeper and deepest zones in this area, which has not been drilled since the 1980s, Inpex revealed that it will conduct a detailed analysis and evaluation of data obtained in order to continue the exploration of prospects in this region.
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    US Oil Producers Are Hedging At Levels Not Seen Since 2007

    The one agreement players seem to have reached is that oil isn’t able to go much higher.

    That oil's upside is capped at this point is clear; in fact as both Goldman and Citi have warned, unless OPEC can come to a definitive and auditable agreement - no just another verbal can kicking - in which the member states, by which we mean almost entirely Saudi Arabia as most of the marginal producers are exempt or want to be, immediately curtail production, oil will promptly crash to $40 or below.

    But an even more amusing twist is that a plunge in oil prices may be just what US shale producers are waiting for. The reason for that is that while OPEC has been busy desperately jawboning oil higher, US producers have been thinking of the inevitable next step, oil's upcoming reacquaintance with gravity. As a result, as the EIA reports, the amount of WTI short positions held be producers and merchants is just shy of a decade high.

    According to a recent EIA report, short positions in West Texas Intermediate (WTI) crude oil futures contracts held by producers or merchants totaled more than 540,000 contracts as of October 11, 2016, the most since 2007, according to data from the U.S. Commodity Futures Trading Commission (CFTC). Banks have tightened lending standards for some energy companies as crude oil prices declined throughout 2014 and 2015, and some banks require producers to hedge against future price risk as a condition for lending.

    Short positions of WTI futures increased at a faster pace than futures contracts of Brent (an international crude oil benchmark) since summer 2016, suggesting U.S. producers are able to drill for oil profitably in the $50 per barrel range. In the Crude Oil Markets Review section of the October Short-Term Energy Outlook(STEO), the U.S. Energy Information Administration (EIA) discusses an increase in U.S. onshore producers’ capital expenditures that is contributing to rising drilling activity, which EIA projects will lead to an increase in U.S. onshore production by the second quarter of 2017.

    Which closes the circle of irony: almost exactly two years ago, Saudi Arabia set off a sequence of events with which it hoped to crush US shale producers and its high cost OPEC competitors. It succeeded partially and briefly, however now the remaining US shale companies are more efficient, restructured, have less debt, a far lower all-in cost of production; and - best of all - they will all make a killing the next time oil plunges, as it will once OPEC's hollow gambit is exposed.

    Meanwhile, the last shred of OPEC credibility will be crushed, the truly high cost oil exporters within OPEC will suffer sovereign defaults and social unrest, as will Saudi Arabia. The good news for Riyadh is that at least it got a $17.5 billion in fresh cash from a bunch of idiots who will never get repaid. We are curious just how long that cash will last the country which burned through $98 billion just last year, before the threat of social unrest and financial system collapse returns? Two months? Three?#

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    Gazprom approves small scale LNG production development programme

    Gazprom has approved the 2017 – 2019 programme for the construction of gas filling infrastructure at the industrial sites of Gazprom subsidiaries, as well as the development programme for small scale LNG production and use.

    Gazprom stated that the broader use of gas as a vehicle fuel was a priority for in the company’s domestic market. The current share of natural gas vehicles (NGVs) throughout Gazprom subsidiaries accounts for 26% (approximately 7200 vehicles) of the group’s vehicle fleet. Gazprom plans to increase this share up to 70% by the end of 2020.

    The approved Program for the construction of gas filling infrastructure outlines a set of measures for converting Gazprom’s vehicle fleet to natural gas and installing gas filling units at the industrial sites of the group’s subsidiaries.

    Gazprom added that LNG production and marketing remains an important part of the company’s efforts aimed at expanding the domestic NGV market. The company sees vast potential for using LNG as a fuel in motor vehicles for long-distance passenger and cargo transportation, in water and rail transport, and in mining and agricultural industries.

    The development programme for small scale LNG production and use includes a list of gas distribution stations (GDSs) and liquefaction technologies most suitable for LNG production. The document provides for the construction of new marketing infrastructure, namely fixed cryogenic filling facilities and mobile LNG filling stations.

    The company is currently working on a number of pilot projects for using LNG in transport.
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    The Beginning Of The End For Europe’s Natural Gas War

    Russia’s Gazprom is on the verge of striking a deal with EU regulators to settle a half-decade old dispute over natural gas pricing, and the resolution could change the way Gazprom does business and lead to lower gas prices for much of Eastern Europe.

    The conflict began back in 2011 when EU antitrust regulators began investigating Gazprom for anticompetitive behavior, citing Gazprom’s practice of pricing natural gas differently to different countries depending on how compliant they were to Moscow. The EU Commission launched a formal investigation that ultimately led to negotiations, which were temporarily put on ice after Russia’s takeover of Crimea.

    The details are arcane, but Gazprom is about to offer concessions to the EU in order to avoid potentially having to pay billions of dollars in fines. These include allowing recipients of Russian gas to resell that gas. Gazprom has opposed that practice because it undercuts their ability to demand certain prices from individual customers and countries. Gazprom and Russia were much happier under the old system, in which they could sign an array of bilateral deals on an individual basis, rather than negotiating with European countries collectively. That allowed the company to tie gas contracts to political aims – should a European country lend its support to a Russian cause, such as a pipeline, they would receive better terms.

    That leads to the second concession that Gazprom will have to grant Europe: they will have to charge customers similar rates for natural gas. But the agreement stops short of entirely breaking Gazprom’s practice of linking gas prices to oil prices.

    “We are now putting the final touch to our commitment proposal. It will be sent to the European Commission shortly,” Alexander Medvedev, Gazprom’s deputy chairman, said this week after meeting with the EU’s top antitrust official, Margrethe Vestager. The deal is not yet secured – it still needs to be reviewed by European countries – but if it is, Gazprom will avoid having to pay billions of dollars in fines. However, the agreement could then become legally binding, subjecting Gazprom to European law, something it has objected to up until now. Gazprom would have to pay fines if it violates the terms of the agreement.

    The settlement would seem to bolster relations between Russia and Europe, which had become strained in recent years after the conflict in Ukraine. Some countries in Eastern Europe are wary of such a thaw and have demanded a much tougher line from European officials. Others in Europe that are at odds with Russia’s actions in Ukraine and Syria are not eager to soften the tone either. To be sure, the settlement over the antitrust charges still needs to survive input from European governments. Poland, in particular, is not happy with the deal. “These decisions pose a real threat to the stability of gas supplies to central and eastern Europe,” the Polish state-owned oil and gas company PGNiG said in a statement.

    Resolving the conflict could also lead to more Russian gas flowing into Europe, which already depends on Russia for about one-third of its gas needs. Russia is hoping to double the gas flows through the Nord Stream pipeline, hoping to gain some market share in a market that is no longer growing. Again, European officials, especially in Eastern Europe, are not keen to see a greater reliance on Russian gas. But the business interests involved in building the expansion of the Nord Stream pipeline, as well as German officials who feel comfortable with Russia as a reliable source of energy, are pushing the deal forward.

    “Another missing point of these puzzles is the future of Nord Stream 2,” a Polish official told the FT. “Now, it looks like they give the Russians too much.”

    Overall, though, the deal would solidify some changes already underway. Gazprom has already begun to link its gas prices closer to hub prices. It needs to do that anyway because it is seeing increased competition from other sources of natural gas, particularly LNG. The U.S. began sending LNG to Europe, and several new LNG ships and import terminals are allowing a few European countries, such as Lithuania, to gain leverage over Gazprom. No longer at the mercy of one supplier, parts of Europe are becoming emboldened to demand lower gas prices from Russia. Whether EU officials will force Gazprom’s hand or not, the Russian gas giant will be forced to keep a lid on its gas prices if it wants to avoid losing market share.
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    A “New Normal” for the Oil Market

    While oil prices have stabilized somewhat in recent months, there are good reasons to believe they won’t return to the high levels that preceded their historic collapse two years ago. For one thing, shale oil production has permanently added to supply at lower prices. For another, demand will be curtailed by slower growth in emerging markets and global efforts to cut down on carbon emissions. It all adds up to a “new normal” for oil.

    The “new” oil supply

    Shale has been a game changer. Unexpectedly strong shale-oil production of 5 million barrels per day contributed to the global supply glut. That, along with the surprising decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep production unchanged, contributed to the oil price collapse that started in June 2014.

    Although the price collapse led to a massive cut in oil investment, production was slow to respond, keeping supply in excess. What’s more, the resilience of shale production to lower prices again surprised market participants, leading to even lower prices in 2015. Shale drillers significantly cut costs by improving efficiency, allowing major players to avoid bankruptcy. While reduced investment is expected to result in lower production by non-OPEC countries in 2016, production still exceeds consumption. Many experts expect oil markets to balance in 2017, albeit with high level of inventory (Chart 1). That said, there is uncertainty regarding supply, especially regarding the cost associated with extraction as well as production from so-called shale “fracklog”—drilled but uncompleted wells. The latter can add to production flows in a matter of weeks and hence considerably change the dynamics of production compared to conventional oil—that features long lead times between investment and production.

    Against that backdrop, OPEC countries and Russia have been increasing output, and Iran’s return to markets has added even more supply. (While OPEC members have recently agreed to cut production, that agreement is yet to be finalized.) There are other factors at play. Recent data suggest that shale-oil production may be once again more resilient than expected. And the anticipation of an OPEC production cut in cooperation with other exporters has boosted prices to the level that will further stimulate output by many shale producers.

    The “new” oil demand

    Falling prices spurred oil-demand growth, which rose to a record high of about 1.8 million barrels per day in 2015. That’s expected to slow to the trend level of 1.2 million barrels per day in 2016 and 2017. Using basic estimates for demand elasticity with respect to price suggests the “price effect” accounts for a 0.8 million-barrel per day increase in demand. A sizable share of oil demand growth is attributable to the price drop rather than income gains. With limited scope for further declines in prices in dollar terms, increases in oil demand will depend largely on prospects for global economic growth.

    The outlook for demand growth isn’t encouraging. In the past couple of years, oil demand has been driven by China and other emerging-market and developing countries. While China accounts for just 15 percent of world oil consumption, its contribution to oil demand growth is significant (Chart 2) because its economy is growing much faster than those of advanced nations (the same is true of some other developing nations). Further slowdowns in emerging and advanced economies can change the demand picture significantly. Structural shifts in emerging economies, especially China’s effort to shift from an investment and export led growth model to a domestic demand led growth model, can also potentially have major implications.

    Over the medium to long run, the transition away from oil and other fossil fuels further clouds the outlook for oil demand albeit lower prices may delay the transition. Energy policies will have to be altered significantly to meet the goals set at the December 2015 Paris Climate Conference (COP21), and a significant portion of oil reserves will have to remain under the ground and unburned. Lack of clarity about the specific actions needed to achieve those goals only adds to uncertainty about the oil-demand outlook.

    Granted, futures markets point to slight gains in oil prices. But a glance at shifts in futures-price curves in the past few months suggests that the prospects for higher prices have been worsening (see Chart 3). That shouldn’t come as a surprise. Downward revisions to global growth forecasts, especially for emerging markets, offset supporting factors, such as the growth in oil demand buoyed by lower prices in the past year. Turmoil in financial markets, plus a strong dollar, has put downward pressure on oil prices. These trends, along with the secular drop in petroleum consumption in advanced economies and the growth of shale, all point to a “lower for longer” scenario for oil prices.
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    Alternative Energy

    Chile holds line on lithium exploration limits despite price rise

    Chile is sticking to its policy of limiting the exploitation of its vast lithium reserves, the country's mining minister told Reuters on Wednesday, despite a surge in prices for the battery and electronics ingredient.

    Battery-grade lithium prices tripled to more than $20,000 a tonne in top consumer China over the summer as demand surged, but Chile continues to consider the mineral as "strategic" and limits its production.

    Private investors, desperate to cash in on the demand-fuelled boom for lithium, which is used in electric vehicles, have criticised Chile's policy of limiting production of a mineral that is no longer really used in nuclear applications.

    "What we are saying is lithium is in the hands of the state," Chilean mining minister Aurora Williams told Reuters on the sidelines of the LME Week industry conference in London.

    Chile, which has one of the world's most plentiful supplies of lithium, is pushing ahead with new policies to develop those reserves, with state copper miner Codelco expected to decide on a partner to develop lithium assets in the Maricunga and Pedernales salt flats in the first quarter of 2017.

    The government has also signed a deal to allow U.S. firm Albemarle to increase output.

    However, it said earlier this year that it would not change the way that lithium is administered, leasing out the rights to its exploitation and restricting the amount produced via quotas.

    Williams said Chile had no preference as to what type of company Codelco partners with, nor does it have any front runners to date.

    "We think Codelco, one of the world's largest mining companies, can create the business model to (explore and mine lithium). It's a (business) model that's been tried and tested."

    By 2035, some 140 million lithium-using electric vehicles will be on the road versus just 1 million now, global miner BHP Billiton told investors at an LME Week event.
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    First Solar's profit slumps 56 pct; company cuts 2016 rev forecast

    First Solar Inc, the largest U.S. solar equipment manufacturer, reported a 55.9 percent drop in quarterly profit on Wednesday, and the company cut its full-year revenue forecast for the second time.

    The company cut its revenue guidance to $2.8 billion-$2.9 billion from $3.8 billion-$4 billion as it revised the sale timing for its California Flats and Moapa projects. The projects are now expected to be sold in 2017.

    First Solar's net income fell to $154.1 million, or $1.49 per share, in the third quarter ended Sept. 30 from $349.3 million, or $3.41 per share, a year earlier.

    Net income in the quarter was hurt by pre-tax charges of $4 million.

    First Solar, the first major U.S. solar company to report quarterly results, said net sales fell 45.9 percent to $688 million due to the completion of multiple systems projects during the quarter.
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    China takes the lead in renewable energy, as cost-effectiveness improves

    China's renewable energy investment constitutes one-third of the world's investment in the area, said Adnan Z. Amin, director-general of the International Renewable Energy Agency.

    China's total investment in renewable energy last year was $102.9 billion, up 17 percent from the same period the year before, said Amin at the International Forum on Energy Transitions held in Suzhou from Oct 30 to 31.

    International investment in renewable energy was $330 billion last year.

    "China is taking the lead in renewable energy development. Last year, China's wind and hydropower newly-installed capacity accounted for more than half of the world's total. Its photovoltaic newly-installed capacity accounted for one third of the world's total," he said.

    The key to renewable energy development is to lower the costs. The infrastructure cost of photovoltaic power has gone down by 70 percent from 2005, said Qu Xiaoye, president and founder of Canadian Solar Inc based in Ontario, and it needs to drop further.

    "China's photovoltaic power accounts for 1 percent of the country's total power. In Germany, the proportion is 7 to 8 percent. With effective cost reduction, photovoltaic power has great room for growth," said Qu.

    According to Qu, every one percentage point reduction in cost will lead to 5 percent reduction in price per kilowatt hour. This is mainly to be achieved by technological research to make the solar panels more cost effective.

    Qu said that the on-grid price of photovoltaic power might be lowered to the same level as fossil fuel-fired power by 2022.

    "Another major cost is financing. Most of the photovoltaic companies lease facilities through financial leasing, which takes up 40 percent of the revenue. Therefore, a more flexible and diversified financing system is needed for renewable energy," said Qu.

    According to a report by IRENA released in June, the average costs of photovoltaic power are going to drop by 59 percent by 2025, compared with the 2015 price of $0.5 per kilowatt.

    Oceanic and land wind power costs are expected to go down by 35 and 25 percent respectively by 2025, according to IRENA.

    China has pledged to increase its share of non-fossil fuels in primary energy consumption from 12 percent in 2015 to 15 percent by 2020 and 20 percent in 2030.

    In order to achieve this goal, the wind and photovoltaic integration into the national grid would need to be at least 400 million kilowatts in 2020 and 1 billion kilowatts in 2030.

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    Tesla says SolarCity would add $1 billion to 2017 revenue

    Tesla Motors Inc said on Tuesday its $2.6 billion merger with SolarCity Corp would add over $500 million in cash to the electric carmaker's balance sheet over the next three years, while contributing over $1 billion to revenue in 2017.

    Shares of Tesla fell another 2 percent in after-hours trade after tumbling 4 percent in afternoon trade to close at $197.73. Similarly, shares of solar panel installer SolarCity fell another 3.5 percent after falling 2.7 percent during regular trading at $19.07.

    Tesla, whose shares had fallen 10 percent since the deal was made public in June, used an eight-page document posted on its blog and investor relations website after the market closed to convince skeptical shareholders in advance of a Nov. 17 vote on the deal.

    Tesla Chief Executive Elon Musk, who is chairman of SolarCity and the largest shareholder in both companies, has described their combination as a "no brainer."

    The document pitched the deal as part of Tesla's mission to combat the "catastrophic impact" of greenhouse gases on the environment by accelerating the world's transition to clean energy.

    "The acquisition will enable us to transform into a truly integrated sustainable energy company," it said, referring to the promise of a unique provider of carbon-free energy, transportation and power storage.

    Naysayers of the deal - whom Musk called out during a conference call with analysts, saying they had never accurately predicted Tesla's success - have said the merger is short on synergies and amounts to a Tesla bailout of money-losing SolarCity.

    Tesla highlighted in the document what it said was expected improvement in SolarCity's GAAP revenue and profitability due to less reliance on leasing and more on purchases. Tesla said that nearly one-third of residential bookings in September were purchases, a four-fold improvement over the first quarter.

    Fewer leases would create "a healthier mix of upfront and recurring revenue," Tesla said.

    SolarCity has $6.34 billion in liabilities, including debt. It is the biggest player in the U.S. residential solar market and has expanded dramatically in the last five years, but it has relied heavily on borrowing money to finance its no-money-down residential solar installations.

    Tesla reiterated that the combined Tesla-SolarCity could generate at least $150 million in cost savings in the first full year, helped by combined sales forces, and consolidating manufacturing and key technologies.

    Pointing to more synergies, Musk told analysts SolarCity had 300,000 installed customers, while Tesla had about 180,000 car owners, creating an ability to cross-sell services such as a solar panel roof unveiled last week.

    "It's a massive upsell opportunity," said SolarCity co-founder and Chief Technology Officer Peter Rive of the company's existing customers. "It's a very simple retrofit procedure to go back to the customers and upsell them."

    Tesla said SolarCity increased its cash balance in the third quarter from the second, although it did not disclose the sum. SolarCity will announce third-quarter results on Nov. 9, SolarCity Chief Executive Lyndon Rive said, indicating that further details about SolarCity performance could not be disclosed until then.

    Tesla's offer, which represents about half of SolarCity's value a year ago, values SolarCity at $25.37 a share.

    SolarCity's stock has fallen 63 percent so far in 2016.

    Tesla itself burned through $759 million in cash in the first three quarters of 2016, and plans to increase spending this quarter in order to fund the launch of its mass-market Model 3 sedan, along with a massive battery factory in Nevada and other plans.

    The company posted its first quarterly net profit in more than three years last week, announced a leaner capital spending plan for 2016, and said it could turn a profit again in the fourth quarter.

    Musk - who owns 19 percent of Tesla and 22 percent of SolarCity - said last week Tesla will not need to raise additional funds in 2016 and said it was possible SolarCity could be a cash contributor in the fourth quarter.

    Tesla faces shareholder lawsuits alleging board members breached their fiduciary duty in approving the deal.

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    Infigen revenue jumps again on big winds, high electricity prices

    South Australia’s high electricity prices and wild weather continue to bear fruit for ASX-listed renewables group Infigen Energy, which has reported a 56 per cent increase in revenue for the quarter, year on year, due to strong winds and higher merchant power prices in the southern state.


    Infigen reported on Monday revenue of $62.8 million for the three months ended 30 September 2016 (Q1 FY17) and an 11 per cent increase in wind energy production compared to the prior corresponding period.

    In a statement on the ASX, the company said the 44GWh boost to production was primarily due to better wind resource in New South Wales and South Australia (SA).

    The 56 per cent or $22.5 million increase in revenue was attributed to that increase in production, as well as to higher merchant electricity prices in SA and to a lesser extent in NSW, and higher large-scale generation certificate (LGC) prices.

    The average bundled price for the sale of electricity and LGCs was $143.71/MWh, up $41.21/MWh or 40% on the previous corresponding period.

    It’s another positive result for Infigen, which last quarter reported an increase in revenue of 47 per cent, compared to Q4 FY15.

    Earlier this month, the company’s long-serving managing director, Miles George, announced he would retire from the position at the end of the calendar year.

    Taking his place will be Ross Rolfe, a former coal and gas industry executive of many years’ experience, who has also served on the Infigen board for the past five years.

    In an interview with RenewEconomy, George described the choice of Ross Rolfe as “a great one” and said his background in fossil fuels was not cause for concern.

    “He has been on our board for the last five years and has an intimate knowledge of our strategy. His intention is to continue that and to build on that and to take the business forward… and to continue developing our pipeline of assets.”

    Infigen’s development pipeline comprises approximately 1,100 megawatts of large-scale wind and solar projects spread across five states in Australia. In South Australia it has three operational wind farms: Lake Bonney 2 (159MW) Lake Bonney 1 (80.5MW) and Lake Bonney 3 (39MW).
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    China’s nuclear roll-out facing delays

    For China’s nuclear industry, 2016 has been a frustrating year. So far, construction has started on only one new plant, and its target of bringing 58 gigawatts of nuclear capacity in service by 2020 seems impossible to meet.

    At present, China has 19.3 gigawatts of nuclear supply under construction and a further 31.4 gigawatts already in service. Given that new plants take five years or more to build, the country faces a shortfall of more than seven gigawatts on its target.

    All the plants started between 2008 and 2010 are online except for six imported reactors. These include four AP1000 reactors designed by Westinghouse, based in the USA but owned by Toshiba of Japan; and two European Pressurised Reactors (EPR), developed by Areva, a French multinational group specialising in nuclear power.

    The plants are not expected to be completed before 2017 and all will be at least three years late, an unprecedented delay in China’s nuclear history. It would be surprising if China was not disillusioned with its suppliers and their technologies.

    Technology problems

    The EPR and AP1000 reactors have been problematic to build. The two EPRs are 3-4 years late although there is little available information detailing why. Meanwhile, EPR plants in Finland and France, which should have been completed in 2009 and 2012, respectively, will not be online before 2018.

    There are no obvious problems that account for the majority of the delays at any of the sites, just a series of quality and planning issues that suggest the complexity of the design makes it difficult to build.

    The four AP1000s are also running 3-4 years late. They are being built by China’s State Nuclear Power Technology Company (SNPTC), which has not built reactors before. There is some publicly available information about the problems suffered in China with the AP1000s, including continual design changes by Westinghouse. The reactor coolant pumps and the squib valves, which are essential to prevent accidents, have been particularly problematic, for example.

    Still, China is expected to be the first country to complete construction of AP1000 and EPR designs, a scenario it did not expect or want. The government is required to develop and demonstrate test procedures for bringing the plants into service, which could take up to a year. These test procedures are developed by vendors and generally standardised although national safety regulators must approve them and can add specific requirements.

    In 2014, a senior official at China’s nuclear safety regulator, the National Nuclear Safety Administration (NNSA) complained that only a small number of test procedures had been developed for the AP1000, and no acceptance criteria had been submitted for review. He said the same issues affect the EPR.

    China will likely be reluctant to commit to further AP1000s (and the CAP1400, a Chinese design modified from the AP1000) until the first of the Westinghouse designs is in service, passes its acceptance tests, and demonstrates safe, reliable operation. There are no plans to build additional EPR reactors.

    In fact, state-owned China General Nuclear (CGN) and China National Nuclear Corporation (CNNC) opted instead to develop medium-sized reactors (1000 megawatts), the ACP1000 and the ACPR1000, respectively, based on Areva’s much older M310 design rather than the EPR.

    Challenging circumstances

    The slowdown in electricity demand growth at home has left China with surplus power-generating capacity. Nuclear is now competing against coal plants supplied with cheap fuel. Furthermore, nuclear has a lower priority for dispatch in winter than combined heat and power plants, which warm homes and factories and typically burn coal and gas.

    In 2015, nuclear power accounted for only 3% of China’s electricity and at any plausible rate of building nuclear plants, it is unlikely that nuclear would achieve more than 10% of China’s electricity supply.

    This year, one reactor (Hongyanhe 3) in Liaoning, operated for only 987 hours in the first quarter of 2016, just 45% of its availability, while reactors in Fujian (Fuqing) and Hainan (Changjiang) were shut down temporarily.

    Another challenge is the strain placed on China’s nuclear regulators in the face of such an ambitious target. The NNSA is under particular pressure to oversee the operation of 36 plants and the construction of 20 plants, as well as being the first regulatory authority to review six new designs. Not even the US Nuclear Regulatory Commission, which monitored standards during the huge build out of the industry in the 1960s and 1970s, has faced such a workload.

    Safety authorities are usually reluctant to appear critical of their international peers but in 2014, a senior French safety regulator described NNSA as “overwhelmed”, and claimed that the storage of components was “not at an adequate level”.  A senior official from SNPTC said in 2015: “Our fatal weakness is our management standards are not high enough.” To build up the capabilities to support such a large construction programme a pause in ordering new plants and equipment may be necessary.

    Uncertain future

    The 58GW target of nuclear capacity in service by 2020 is not achievable and, like nuclear capacity targets in the past in China and elsewhere, it will be quietly revised down. The challenge for the Chinese nuclear industry is to do what no other nuclear industry worldwide has been able to do; to bring the cost of nuclear generation down to levels at which it can compete with other forms of generation, particularly renewables.

    If it is unable to do this, China cannot afford to carry on ordering nuclear plants and nuclear will retain a small proportion of the electricity mix.

    This leaves China’s nuclear export drive in a precarious position. Since 2013, China has turned its attention to nuclear export markets, offering apparently strong advantages over its competitors. The Chinese government can call on all the resources of China to offer a package of equipment, construction expertise, finance and training that none of its rivals, even Russia, can match.

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    Cameco's profit beats estimates on higher uranium sales

    Canadian uranium producer Cameco Corp on Wednesday reported a better-than-expected quarterly profit, largely helped by a jump in uranium sales volumes.

    Cameco's uranium sales rose 35 percent to 9.3 million pounds in the third quarter ended Sept. 30, while its average realized uranium price fell 0.6 percent to $43.37 per pound.

    Chief Executive Tim Gitzel said though uranium prices are at the lowest levels in more than a decade, the company's average realized prices were well above the market price thanks to its portfolio of long-term contracts.

    However, Cameco warned that the uranium market would remain depressed until Japan's nuclear reactors are restarted and excess supply is depleted, among other things.

    The 2011 Fukushima meltdown led to shutdowns of all of Japan's nuclear reactors, depressing the radioactive metal's price. Some reactors have since come back online, but global uranium inventories remain high.

    Cameco reported a net profit of C$142 million, or 36 Canadian cents per share, attributable to equity holders in the quarter, compared with a loss of C$4 million, or 1 Canadian cent per share, a year earlier.

    Excluding items, the company earned 30 Canadian cents per share, beating the average analyst estimate of 28 Canadian cents per share, according to Thomson Reuters I/B/E/S.

    Revenue rose 3.2 percent to C$670 million, beating analysts' expectation of C$654.9 million.
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    Daily uranium spot price tumbles to $18.75/lb, lowest since 2004

    The daily spot price of uranium at the end of Monday trading was $18.75/lb U308, down $1.25 week on week and the lowest daily price since around mid-2004, with buyers and sellers continuing to conclude deals at progressively lower prices, as they have since mid-October, sources said.

    The price is 45.2% below the $34.10/lb daily spot price that price reporting company TradeTech reported January 1. The price reported Monday is down 15.7% since October 14, when TradeTech put the price at $22.25/lb. Since September 1, when TradeTech reported a U3O8 daily spot price of $25.50/lb, it has tumbled 26.5%.

    The price slide was spurred by talk among participants at the Nuclear Energy Institute's October 17-19 International Uranium Fuel Seminar in Naples, Florida, that "there are several million pounds that need to be placed by year end," one market source said Friday.

    "This made people uneasy, especially the traders," he said, adding: "The feeling was, among them, that they'd better be aggressive enough on price to place material, because the supply may outstrip demand."

    "This led the price down and is still doing so. This is the psychological factor that's come into play," he said.

    A second market source said: "There's some talk about looming utility buying, but whatever demand there is, is very weak. You'll see the bid prices continuing down, and the ask price will follow the bids down."

    TradeTech, in a report Monday, said: "Sellers are facing a rise in financial pressure and the need to generate cash, along with year-end sales objectives."

    "Utilities are generally well covered in the near term and unwilling to make purchase commitments without an adequate price incentive. As a result, sellers are faced with holding inventory or slashing prices in order to conclude sales," it said.

    Another factor depressing the spot price, according to sources, is the continuing abundance of material available for sale. TradeTech said on Monday there was 4.4 million lb U3O8 "available for sale" and 2.7 million lb of "inquiries to purchase" material.

    A third source interviewed Friday said U3O8 supplies are being inflated by fourth-quarter transfers of US-owned uranium to private contractors in lieu of payment to clean up the US Department of Energy's now-shuttered Paducah and Portsmouth gaseous diffusion uranium enrichment plants.

    Under a secretarial determination, DOE can transfer up to 900 mt, or just under 2 million lb, of the material in Q4. The contractors monetize the U3O8 received from DOE by placing the material with commodity trading firms that sell the U3O8, generally on the spot market.

    "When you have this much material coming up against a very limited demand, there's no surprise that the spot price keeps falling," this source said in an October 20 interview.

    TradeTech on Friday reported a $19.75/lb weekly spot price, down 25 cents from October 21.

    Its fellow price reporting company Ux Consulting's market report for the week that ended Monday put the weekly spot price at $18.75/lb, down $1.25 week on week.

    Ux reported a Broker Average Price Monday of $18.81/lb, down 78 cents compared with Friday. It said the bid-offer spread on Monday was $18.50/lb-$19.12/lb, with the bid down 88 cents and the offer down 68 cents. The BAP is based on information from Evolution Markets and Numerco Ltd., according to Ux.
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    Agrium posts surprise loss on low fertilizer prices

    Canadian fertilizer maker Agrium Inc , reported a surprise quarterly loss on Thursday as it grapples with low fertilizer and crop prices, and also cut its full-year profit forecast.

    U.S. farmers are cutting back on spreading fertilizer this autumn in response to a drop in crop prices to multi-year lows and a delayed harvest, dealers say, warning of a pullback that will be felt from grain markets to Canadian potash mines.

    Agrium cut its full-year profit forecast to $4.60 to $5 per share, from the prior range of $5 to $5.30 per share.

    In September, Potash Corp of Saskatchewan Inc and Agrium agreed to join forces in an all-stock deal that will allow Potash shareholders to own 52 percent of the new company, with the rest going to Agrium shareholders.

    Shareholders of both companies are scheduled to wrap up voting later on Thursday, and they are expected to back the merger.

    Agrium reported a net loss from continuing operations of $39 million, or 29 cents per share, in the third quarter ended Sept. 30, compared with a net profit of $99 million, or 72 cents per share, a year earlier.

    On an adjusted basis, Agrium posted a loss of 12 cents per share. Analysts on average had expected earnings of 11 cents per share, according to Thomson Reuters I/B/E/S.

    Total sales fell by about 11 percent to $2.25 billion.
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    China loosens land transfer rules to spur larger, more efficient farms

    China has relaxed rules to allow farmers to transfer their land rights to help promote more efficient, large-scale farms, amid an exodus of farm workers to the cities.

    The authorities on Sunday recommended separating various rights to rural land, which they say would improve land circulation, increase farmers' incomes, and contribute to the development of modern agriculture.

    China's Agriculture Minister Han Changfu told a news conference on Thursday that the separation of rural land ownership rights, contracted rights and operating rights is a key reform step.

    "This helps guide the orderly transfer of land operating rights and lay a system foundation for appropriate-scale agricultural operations the development and modern agriculture," he said.

    The step will help improve land and labor efficiency in the farm sector, he said, but he added that farmers will not be forced to transfer their land rights.

    Farmland in China is collectively owned and farmers only have the right to contract and use the land. Many rural migrant workers have leased out their land to those who stay in the countryside or commercial entities.

    Over 30 percent of rural land has already been leased to others to operate, said Han.

    Chinese farmers still cannot sell their land rights freely and the lack of clear rights makes many farmers vulnerable to land grabs by local administrations for development. A program to issue certificates confirming rights to land has covered 60 percent of farmland.

    He said the guidelines will also better protect the rights of those that lease and operate the land from farmers, helping to encourage more investment in more efficient and productive agriculture.

    The priority for the world's most populous country is to ensure enough land and rural labor to maintain food security.

    Land reform and household registration are two key issues if China is to succeed in its plan to get 100 million migrants to settle in cities by 2020.

    China's leaders aim for 60 percent of the population of almost 1.4 billion to be living in cities by 2020, turning millions of rural dwellers into consumers who could be a driving force for the world's second-largest economy.

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    Fertilizer maker CF Industries posts first quarterly loss since 2010

    U.S. nitrogen fertilizer producer CF Industries Holdings Inc on Wednesday reported a loss for the third quarter, its first in six and a half years, pressured by lower prices.

    Fertilizer prices have plunged this year amid declining U.S. farm incomes and ample supplies, even as CF completes expansion of nitrogen facilities in Louisiana and Iowa.

    Buyers were slow to stock up as prices declined during the period and with new production capacity coming online through mid-2017, CF, North America's largest maker of nitrogen fertilizer, said in a statement.

    CF's quarterly loss totaled $30 million, or 13 cents per share, compared with a profit of $90 million or 39 cents per share a year earlier. Net sales fell by 27 percent to $680 million.

    The last time CF posted a quarterly loss was the first quarter of 2010, according to Thomson Reuters data.

    Excluding one-time items including expansion costs, CF earned $30 million or 13 cents per share, topping the average analyst estimate of a 3-cent per share loss, according to Thomson Reuters I/B/E/S.

    The Deerfield, Illinois-based company's shares fell about 3 percent after normal trading hours on the New York Stock Exchange.
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    Archer Daniels Midland's profit beats estimates

    The world's largest corn mill of global grain company Archer Daniels Midland is pictured in Decatur, Illinois March 16, 2015. REUTERS/Karl Plume

    U.S. agricultural products trader Archer Daniels Midland Co (ADM.N) reported a far better-than-expected third-quarter profit on Tuesday as higher U.S. exports of corn and soybeans boosted volumes and margins.

    U.S. farmers have nearly completed what is expected to be the largest corn and soybean harvests on record, which should benefit ADM again in the current quarter.

    "With improving market conditions and a large U.S. harvest, combined with the team's solid execution capabilities, we feel good about the remainder of the year and a stronger 2017," Chief Executive Juan Luciano said in a statement.

    Chicago-based ADM makes money buying, selling, storing, transporting and processing grains and oilseeds around the world. Margins are typically thin, but volumes are massive when crop supplies are abundant and prices are low, as they are now.

    Export sales of corn and soybeans from the United States were well ahead of the normal pace in the third quarter, although volumes shipped from South America declined.

    ADM, whose shares were up 3.9 percent at $45.25 in premarket trading, said net earnings attributable to the company rose to $341 million, or 58 cents per share, in the quarter ended Sept. 30, from $252 million, or 41 cents per share, a year earlier.

    Revenue fell 4.4 percent to $15.83 billion.

    Excluding items, ADM earned 59 cents per share, beating the average analysts' estimate of 46 cents a share, according to Thomson Reuters I/B/E/S.
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    Mosaic profit beats on higher potash sales

    Mosaic Co (MOS.N), the world's largest producer of finished phosphate products, reported an adjusted quarterly profit that handily beat estimates as the company sold more potash than it had expected.

    The Plymouth, Minnesota-based company sold 2.2 million tonnes of potash in the three months ended Sept. 30, compared with its forecast of 1.8-2.1 million tonnes, and up from 2.1 million tonnes last year.

    Still, the average realized price of $160 per tonne of potash, was much lower than $265 per tonne a year earlier.

    Fertilizer prices have fallen steeply, triggered in part by weak currencies in importing countries such as Brazil, and excessive supplies.

    Larger rival Potash Corp of Saskatchewan Inc (POT.TO) last week reduced its profit guidance for the year, saying that a recovery of the potash market would take more time, and recorded higher than expected quarterly earnings.

    Mosaic said it sold 2.5 million tonnes of phosphate in the third quarter, at an average price of $326 per tonne of diammonium phosphate, compared with 2.1 million tonnes at $451 per tonne a year earlier.

    Mosaic's net earnings fell to $39.2 million, or 11 cents per share, from $160 million, or 45 cents per share, a year earlier.

    Excluding items, profit was 33 cents per share, much higher than analysts' average estimate of 10 cents per share, according to Thomson Reuters I/B/E/S.

    The U.S. fertilizer company said net sales fell 7.3 percent to $1.95 billion, but beat estimates of $1.92 billion.
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    China to launch first e-commerce satellite in 2017

    China plans to launch its first e-commerce satellite in 2017, with the primary purpose of using satellite data in agriculture.

    The plan was announced on Monday during an international aviation and aerospace forum in Zhuhai, Guangdong Province, by the China Academy of Launch Vehicle Technology, China Aerospace Museum and Juhuasuan, an arm of e-commerce giant Alibaba.

    "In an era of space economy, the potential of a commercial space industry is immeasurable," Han Qingping, president of the Chinarocket Co., Ltd, said at the forum.

    In 2015, the value of the global space industry amounted to 330 billion U.S. dollars, 76 percent of which resulted from commercial activities.

    Chinese authorities are making efforts, including legislation, to support and regulate the development of a commercial space industry.

    "China is speeding up the making of space law, with the aim of having completed drafting the law by the end of this year," Hu Chaobin, an official from the State Administration of Science, Technology and Industry for National Defense, said during the forum.
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    Precious Metals

    Fosun in exclusive talks to buy stake in Russian gold miner Polyus: sources

    Fosun International Ltd, is in exclusive talks to buy a large minority stake in Russia's biggest gold miner Polyus, three sources with knowledge of the matter told Reuters, in what would be the Chinese group's maiden Russian deal.

    Fosun, an aggressive buyer known internationally for its purchase of French resort operator Club Med, is keen to invest in Russia and other emerging markets such as India, as it moves away from Europe and developed markets. Reuters reported in August that Fosun is also in talks to buy a minority stake in Russian investment bank Renaissance Capital..

    Fosun's interest in Polyus comes as other Chinese companies have also been targeting gold mine acquisitions to meet domestic demand amid a recovery in prices. State-controlled Zijin Mining Group Co Ltd and state-backed Shandong Gold Mining Co Ltd held separate talks with Canada's Barrick Gold Corp to buy a 50 percent stake in an Argentinian gold mine, Reuters reported last month..

    China, the world's top consumer, producer and importer of gold, has ambitions to be a global gold price setter. It recently set up a yuan-based gold 'fix' that establishes a regional benchmark.

    The talks between Fosun and Polyus have been underway for a couple of weeks, said sources, who declined to be named as the talks are confidential.

    The two companies are still negotiating the final terms, including the size of the stake, and any deal value could be subject to last minute changes, one of the people said. Fosun is conducting due diligence on Polyus but no deal is imminent, the person added.

    One of the sources said Fosun is looking to invest around $2 billion in Polyus, owned by the family of Russian billionaire Suleiman Kerimov. The source added that Fosun is looking to form a consortium of private equity investors to help finance the deal.

    Both Fosun and Polyus declined to comment.

    Both Zijin and Shandong Gold had previously expressed interest in buying a Polyus stake, one of the sources said. Zijing declined to comment while Shandong Gold did not offer an immediate comment.


    Based on Polyus' outstanding shares, the Russian gold miner has a market value of about $9 billion, according to Reuters calculations.

    Polyus is planning a public placement with either existing or new shareholders as it needs to raise its free float to at least 10 percent to meet Moscow Exchange requirements, Reuters reported last month.

    Fosun's interest in Polyus comes as the Shanghai-based conglomerate, controlled by billionaire co-founder Guo Guangchang, is shifting its investment focus to emerging markets where asset valuations are lower and growth prospects are higher.

    Fosun this year acquired India's Gland Pharma from KKR & Co for about $1.3 billion, marking its first Indian acquisition.. The company has spent more than $30 billion over the past two decades buying real estate, insurance, leisure and tourism assets globally.

    Guo, 49, one of China's most powerful business leaders, told Reuters in June that he considered 2016 a "good time" to invest in oil and commodities, adding that Fosun would increase investment in this segment.

    Born in a rural village in the eastern province of Zhejiang, Guo studied philosophy at Shanghai's elite Fudan University and serves as a delegate to the National Committee of the Chinese People's Political Consultative Conference, a parliamentary advisory body.

    Fosun first diversified into natural resources in 2014 when it bought Australia's Roc Oil Co for A$474 million, although Guo said the investment wasn't a success due to plunging oil prices.

    In Russia, Fosun has already set up two subsidiaries - Fosun Management (Russia) and Fosun Eurasia Capital - to seek investment opportunities and build its asset management business in the country and neighboring regions, its website shows.

    Moscow-based Polyus has posted a steady rise in gold output over the last few years and expects to produce up to 1.90 million ounces of gold this year. It also has the world's fourth-largest gold reserves, according to the company, with over 64 million ounces of proven and probable gold reserves.

    A weakened rouble has lowered the costs of gold mining in Russia in dollar terms, helping Polyus to post a record first-half core profit margin. Net debt, however, jumped during 2016 due to a share buyback and stood at $2.9 billion at the end of September.

    (Reporting by Julie Zhu in HONG KONG and; Polina Devitt in MOSCOW; Additional reporting by Oksana Kobzeva, Olga Popova, and Andrey Kuzmin; Writing by Denny Thomas; Editing by Lisa Jucca and Richard Pullin)
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    Canadian miners complain of hefty taxes, weak rule of law in Mexico

    Canadian miners are seeking a meeting with Mexico's president to air grievances about issues ranging from the rule of law to aggressive tax collection, according to an unusually strident letter by an industry group published on Monday.

    President Enrique Pena Nieto should intervene for Mexico to "recover its position in relation to other investment destinations in the hemisphere," the Canadian Chamber of Commerce in Mexico (CanCham) wrote on behalf of the miners, in a letter printed in Mexico's Reforma newspaper.

    The letter cited unrest earlier this month at Goldcorp's Penasquito gold mine in the state of Zacatecas, where a week-long blockade by a trucking contractor forced operations to shut down temporarily.

    "Goldcorp did not get support from Mexican institutions to end the illegal blockade and was forced to negotiate individually with the truckers in the absence of the application of the law," the letter read.

    CanCham also flagged "a policy of aggressive tax collection" at SAT, Mexico's tax authority, complaining of a spike in the number of audits and delays in receiving value-added-tax (VAT) refunds. They also expressed concern about new mining royalties.

    Reuters reported last year that Mexico's government withheld hundreds of millions of dollars in tax refunds owed to Procter & Gamble, Unilever, and Colgate combined as it sought to coax them and other multinationals to pay more income tax locally.

    Neither the president's office nor SAT responded to requests for comment.
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    South Africa's AMCU union to sign wage deals with platinum trio

    South Africa's AMCU union said on Sunday it is ready to sign three-year wage deals with the country's big three platinum producers.

    The Association of Mineworkers and Construction Union (AMCU) said on Thursday it had agreed a pay rise deal with Anglo American Platinum, but had yet to say whether it would agree to deals with Impala Platinum and Lonmin .

    "Members have given the leadership the mandate to sign all three wage agreements with the platinum companies," the union said on its twitter page on Sunday, without giving details.

    AMCU spokesman Manzini Zungu could not be contacted immediately by Reuters, but the union was due to hold a media briefing on Monday to disclose details of the agreements.

    Implats spokesman Johan Theron and Lonmin spokeswoman Wendy Tlou said they would wait for the official signing before disclosing details.

    Amplats and AMCU agreed to pay hikes of between 7 percent and 12.5 percent annually over the next three years, depending on the level of employment.

    AMCU, known for its militancy and aggressive stance in wage talks, had pushed for wage hikes of close to 50 percent.
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    Base Metals

    Copper market seen 'broadly balanced' in 2016, 2017 -IWCC

    Global demand for copper is expected to broadly meet supply in 2016 and 2017, while there is a chance of stronger-than-expected consumption in top user China, an industry body said on Friday.

    The International Wrought Copper Council (IWCC) sees a modest 120,000-tonne deficit this year, narrowing to 60,000 tonnes in 2017.

    "Forecasts therefore suggest that in both 2016 and 2017 the copper market will be broadly balanced," the IWCC said in a statement.

    Refined copper production in 2016 is expected to rise 2 percent from the year before to 22.38 million tonnes, while global demand for refined copper will climb 2.6 percent to 22.26 million tonnes.

    For 2017, the body sees refined copper output at 22.77 million tonnes, growing 1.7 percent compared with 2016, with demand climbing 2 percent to 22.71 million tonnes.

    Demand in top consumer China is set to hit 10.5 million tonnes this year, up 4.1 percent on last year, with 2.4-percent growth next year to 10.75 million tonnes.

    "There is perhaps more upside demand potential in China in 2017 than the figure might suggest," the IWCC said, without giving details.

    Meanwhile, demand for refined copper in the European Union is forecast to increase 0.5 percent to 3.15 million tonnes this year, rising to 3.19 million tonnes in 2017.

    The IWCC sees slightly lower demand from Japan and the United States in 2016, although that will stabilise next year in Japan and recover in the United States to 1.82 million tonnes.

    Global copper mine production this year is expected to grow 1.4 percent to 19.2 million tonnes, rising another 2.1 percent to 19.61 million tonnes in 2017.

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    Twelve U.S. senators urge security rejection of China aluminum M&A deal

    Twelve U.S. senators urged on Wednesday that a national security review panel reject Chinese aluminum giant Zhongwang International Group Ltd's proposed $2.3 billion purchase of U.S. aluminum products maker Aleris Corp.

    The senators asked Treasury Secretary Jack Lew in a letter to launch a review of the deal by the Committee on Foreign Investments in the United States and "ultimately reject it" on grounds that it would damage the U.S. defense industrial base.

    "Zhongwang’s purchase of Aleris would directly undermine our national security, including by jeopardizing the U.S. manufacturing base for sensitive technologies in an industry already devastated by the effects of China’s market distorting policies, and creating serious risk that sensitive technologies and knowhow will be transferred to China, further imperiling U.S. defense interests," the senators wrote.

    The deal, announced just over two months ago, would give one of the world's largest makers of extruded aluminum products access to U.S. technology and customers, which include Boeing Co and U.S. and European automakers that are increasingly turning to aluminum.

    It comes as another Zhongwang subsidiary is embroiled in a dispute over U.S. import duties amid broader trade tensions between the U.S. aluminum industry and China.

    The U.S. Commerce Department is currently investigating China Zhongwang Holdings Ltd over allegations that it has been evading U.S. import duties on extruded products by shipping them through third countries.

    The letter to Lew was signed by Republican Rob Portman of Ohio, where Aleris is based, and Democrats Ron Wyden, Charles Schumer, Bob Casey, Joe Manchin, Kirsten Gillibrand, Joe Donnelly, Debbie Stabenow, Jeff Merkley, Amy Klobuchar, Tammy Baldwin and Al Franken.

    They said the review committee needed to be cautious about the potential for sensitive research data to be transferred to China, including data with military applications such as advanced modeling techniques, high-strength alloys and the design of light armor material.

    "Despite the national security importance of our nation’s aluminum sector, the industry continues to be decimated by China’s market distorting policies that contribute to vast overcapacity," the senators wrote.

    "China’s overcapacity in aluminum has directly contributed to severe reductions in U.S. domestic production as smelters unable to compete have been forced to close. Each such closure further imperils our nation’s ability to ensure a reliable supply of strategic materials in times of crisis," they wrote.

    A Treasury spokeswoman declined to comment on the letter, adding that information filed with CFIUS by law cannot be disclosed to the public and that Treasury does not comment on specific CFIUS cases.

    Aleris said in a statement reacting to the letter that the company's U.S. facilities produce no defense-related products, and the technology for aluminum plate used in some defense products was widely used in the industry.

    "Our facilities in the U.S. produce aluminum for car and truck exteriors, gutters and roofing material," Aleris said. " Less than one percent of our sales go into defense applications, and none of those goods are produced in the U.S."

    A Zhongwang spokeswoman said in a statement that the CFIUS filing for the transaction is voluntary and that the company and its U.S. subsidiary have no connection with the Chinese government. She added that the transaction will bring in additional resources and capital to Aleris and there will be no changes to management, employees or business strategies.

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    Outage at New Caledonia nickel producer SLN hits production

    New Caledonia nickel producer Societe Le Nickel, a subsidiary of French conglomerate Eramet , on Wednesday said a series of explosions at a smelter had temporarily disrupted output earlier this week.

    SLN spokesman Olivier Beligon said one of the Doniambo nickel smelter's three furnaces was shut for 24 hours after the explosions caused a leak and staff were evacuated.

    "The furnace started to resume operations yesterday and we are now back to normal," Beligon said by telephone from New Caledonia's capital Noumea, adding that specifics on lost production were not yet available.

    The SNL smelter in Noumea is a leading world supplier of ferronickel, used to make stainless steel. SNL has forecast production of around 53,000 tonnes of nickel this year, or 5 percent of total global output.

    New Caledonia, a French Pacific territory, holds around a quarter of the world's reserves of nickel. Two other smelters are owned by Glencore and Vale.

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    Red Kite head warns LME fees, high-speed trading hit volumes

    The London Metal Exchange should further cut fees and review rules that may give high-speed traders an unfair advantage, the founding partner of Red Kite Group, Michael Farmer, said on Tuesday.

    Farmer, who has earned the nickname Mr. Copper for his long experience in industrial metals trading, warned that rising fees and high-frequency trading will further cut liquidity on the LME, which has suffered sliding volumes this year.

    High-frequency trading (HFT) uses super-fast computers and connections to place large numbers of orders at lightning speeds.

    "High-frequency trading appears to have no other purpose than to make money from the trading of other participants by jumping ahead of them," Farmer said during metal industry gathering LME Week in London.

    "This does appear to me to be an unfair advantage and could be described as front running," he said in a keynote speech at the LME Week dinner.

    In front-running, which is illegal, a broker or trader places their own orders in front of those from incoming clients that are expected to impact the price.

    The Red Kite Group, which has hedge funds, physical trading and mining finance, has $2.3 billion of assets, surviving in a sector that has seen many other participants close down during a tough period of falling prices.

    Farmer said the LME's rules and regulations might "unwittingly give some users unfair advantage over others, particularly in the brave new world of electronic platform trading".

    He added: "This will without doubt reduce liquidity, volumes on the LME."

    The LME has sought to boost electronic trading to lure more speculators and boost volumes, but this has sparked a battle with some members who worry about perceived threats to the traditional LME structure based on physical business, including from miners and fabricators.

    The LME, however, has shelved plans to make it cheaper and easier for speculative funds to trade to avoid fuelling further conflict with traditional members, sources told Reuters this week.


    Farmer, also a member of the British House of Lords, urged the LME to take another look at its fees, which caused a backlash from many customers when they were hiked.

    LME volumes have been tumbling since the exchange imposed a hefty 31 percent increase in average trading fees in January 2015.

    The exchange, the world's oldest and largest market for industrial metals, relented, cutting fees by 44 percent for short-term trades, but said in August it planned no further fee cuts.

    Farmer warned the LME, owned by Hong Kong Exchanges and Clearing Ltd., competitors were waiting in the wings to grab its business.

    "If costs of trading on the exchange are prohibitive, it will drive customers away and the golden goose will die of malnutrition," he said.

    "Many users will still find the cost of trading to be high and I would strongly recommend the LME to consider further reductions to attract liquidity back."
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    Copper at risk of being squeezed as prices lag incentive levels

    A lack of investment in new project capacity risks squeezing copper prices higher in the next decade, with current prices falling well short of what is needed to tempt fresh money into the sector.

    After years of strong output and lacklustre demand, copper prices are languishing at around $4,750 a tonne, close to January's seven-year low at $4,318.

    Analysts surveyed by Reuters in recent weeks pegged incentive prices for the metal - at which investment in new projects becomes viable - at $6,200-7,000 a tonne. The premium of that price over the benchmark suggests consumers are having no difficulty sourcing copper.

    "Current spot prices are way below incentive prices, indicating that metal is more than well supplied," said Societe Generale analyst Robin Bhar, speaking as the metals industry prepares to gather in London next week for LME Week, a series of seminars and functions surrounding the London Metal Exchange.

    Copper prices have dropped precipitously from over $10,000 a tonne in 2011 to less than half that this year, as a once-undersupplied market swung back into surplus.

    That has led producers to mothball capacity, while holding off investing in new projects. Projects given the green light during the boom years have still been coming online, however, keeping supply buoyant.

    In terms of maintaining current output, analysts flag up concentration risks in the market.

    "You have five mines accounting for 80 percent of net supply growth," Bank of America-Merrill Lynch analyst Michael Widmer said.

    "There is a real risk that you won't get each of those mines hitting guidance, and then you will potentially run short of mine supply as soon as next year."

    Future projects in copper are likely to be lower grade and in more remote areas with less developed infrastructure, pushing up costs, Citi said.

    Deutsche Bank earlier in 2016 predicted small surpluses this year and next, but a deficit of 280,000 tonnes in 2018, 350,000 in 2019 and 280,000 in 2020.

    That is likely to trigger a price response, in turn incentivising more supply. But the length of time needed for new copper projects to move from inception to production looks like creating the perfect conditions for a price squeeze.

    "Copper is a very slow business in terms of new project development - I always equate it to an oil tanker trying to turn," Macquarie analyst Vivienne Lloyd said.

    "It takes eight to 11 years to bring on a greenfield copper mine. Miners haven't been committing the development this year, last year and the year before that would have been required to bring things on by 2020. So, as usual, the cycle will turn too late. We'll have a deficit, and prices will really go up."

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    Aluminum: China road regulations limit supply

    Since mid-September, China has enforced a lower maximum load weight on trucks, from 55 mt to 49 mt, with Commerzbank commenting that "the costs of transporting aluminum by lorry have risen sharply," as a result as there are "not sufficient rail transport capacities available" in the aluminum-producing provinces in the north of the country.

    Market analysts have said that this could increase producer costs by as much as 30%, the Wall Street Journal reported.

    "This change has come at a time when orders in China are very decent, so there is also a demand story in play," a trader said Friday.

    Since September 21, the day the regulation was introduced, several Asian LME warehouses have also seen a drawdown in stocks. Live Singaporean warrants have subsequently fallen by 11,425 mt as of Friday since September 21, with some market participants saying some of this may be sent to China on the higher price environment.

    On the same day in September, 28,800 mt of LME warrants were canceled in Singapore with further cancellations arising over the month of October. Busan cancellations rose to 17,325 mt in early October, with the majority of this already loaded out.

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    Glencore closes another zinc mine

    Apart from steelmaking raw materials iron ore and coking coal, zinc is the best performing mined commodity in 2016. Trading at $2,374 a tonne, the metal is up 47% year to date.

    Zinc's prospects brightened considerably after the shutdown of two major mines last year – Australia's Century and the Lisheen mine in Ireland. The two mines had a combined output of more than 630,000. The shuttering of top zinc producer Glencore’s depleted Brunswick and Perseverance mines in Canada in 2012 brings total tonnes going offline since 2013 to more than one million tonnes.

    Glencore has been out in front when it comes to curtailing production to shore up prices and the Swiss giants' announcement of cutbacks inspired another leg up in the price. Glencore's first half production numbers showed a 31% output decline to 506,000 tonnes after the company idled mines in Peru and downscaled its Australia operations.

    On Monday announced another zinc and lead mine closure due to depletion of reserves. According to the company the mine began production in 2004 with an initial expectation of an eight year life but it lasted 13 years producing 40m tonnes of ore, 1.75m tonnes of contained zinc metal and nearly one million tonnes of contained lead metal.

    Glencore said it has implemented a staged workforce transition program over the past three years with many employees redeployed to other operations.

    In a statement Glencore’s Chief Operating Officer for Zinc Assets Australia Greg Ashe as saying Black Star’s workforce "overcame a number of unique geotechnical and mining challenges presented by an old expansive network of abandoned underground workings":

    “The team adopted an innovative approach to void analysis, which enabled the safe and sustainable recovery of a valuable mineral resource that would otherwise have been inaccessible.”
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    Aluminium: Intrigues.

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    Peru copper miner MMG bypassing protesters at Las Bambas to ship ore

    Chinese-owned miner MMG Ltd is using an alternate route to move copper from its Las Bambas mine to port as a key road in Peru remained blocked by protests on Friday, the company said.

    Four communities in the remote Andean region of Apurimac oppose a deal that the government recently struck with other towns to lift protests that had shut down ground transportation from the mine, said Las Bambas spokesman Domingo Drago.

    The four Quechua-speaking communities have demanded payment for the company's use of a local road that they say pollutes their lands when hundreds of trucks carrying copper concentrates pass by daily.

    Talks between community leaders and government mediators broke down earlier this month after a protester was shot dead in clashes with police trying to end their weeklong blockage of the road.

    Government officials said earlier this week that they expected the four communities to sign onto the preliminary agreement brokered with other towns that had joined protest in a bid to push for broader development in the province of Cotabambas.

    The protest halted Las Bambas' exports from the port of Matarani as stocks were depleted and road blockages threatened to choke off supplies needed to keep operating the mine.

    Drago said he was not sure if exports had resumed on Friday. The company said earlier this week that it expected to start shipping again at the end of October or beginning of November.

    MMG said has said production has not been affected by the protests and that it still expects Las Bambas to churn out 250,000 to 300,000 tonnes of copper this year.
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    Grupo Mexico says profit fell, no rail IPO for now

    Mexican mining, rail, and infrastructure company Grupo Mexico reported a 25.6 percent drop in quarterly net profit that it blamed on an "other income" loss, despite rising revenue from copper production.

    Grupo Mexico in a filing dated Oct. 27 reported a third-quarter net profit of $220.6 million, compared with $296.5 million a year earlier.

    The company's revenue rose 9.9 percent to $2.1 billion, boosted by an increase in low-cost copper production resulting from expanded operations at its Buenavista mine in northern Mexico.

    The company said, however, it had an "other income" loss of $81.8 million, compared with a gain of $150.5 million in the same period in 2015.

    On a later conference call with analysts, executives said the long-delayed initial public offering of the company's rail unit was not viable right now but that Grupo Mexicowould revisit the situation again in the first quarter of 2017.
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    Steel, Iron Ore and Coal

    China's key steel mills daily output slides 1.3pct in mid-Oct

    Daily crude steel output of China's key steel mills slid 1.31% from ten days ago to 1.72 million tonnes over October 11-20, according to data released by the China Iron and Steel Association (CISA).

    Analysts attributed the drop to sluggish demand from infrastructure construction industry and increased costs of raw material, which resulting in furnaces maintenance.

    The average daily crude steel output across the country was estimated at 2.26 million tonnes during the same period, slipping 1.17% from ten days ago and falling 2.36% from the month-ago level, the CISA said.

    By October 20, stocks of steel products at key steel mills stood at 13.61 million tonnes, dropping 1.89% from ten days ago and down 4.08% from a month ago, the CISA data showed.

    By October 28, total stocks of major steel products in China slid 5.53% on month to 8.94 million tonnes, the third consecutive drop on weekly basis, as operating rate fell back affected by tight supply of coking coal and coke.
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    Hebei to cut 12.40 Mpta of coke capacity in 2016

    North China's Hebei province planned to slash 12.40 million tonnes per annum (Mpta) of coke production capacity during 2016, and another 10.29 Mtpa in 2017, to lower pollutants emission, the provincial Environmental Protection Bureau announced in a statement on prevention of air pollution.

    Hebei aims to trim its coke-making industry, by stopping approval of newly-added coke projects and eliminate outdated capacities. There will be no coking plants operating in Zhangjiakou, Langfang, Baoding and Hengshui.

    The province will also move coke producers off areas surrounding Beijing, ecological protection areas and downtowns, guide those cannot withdraw to transform, merge and reorganize with large enterprises, and arrange qualified coke capacity into circulatory chemical industrial park.

    Meanwhile, Hebei vows to control coke capacity within 100 Mtpa by the end of 2018, and smoke, sulfur dioxide and nitric oxide emissions from the coking industry within 0.1 million tonnes, 0.05 million tonnes and 0.15 million tonnes, separately.

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    Industry Minister meets Posco to discuss Whyalla future, possible bid

    South Korean steel major Posco has emerged as a viable buyer for the steelworks division of the now defunct Arrium.

    Federal Industry Minister Greg Hunt on Thursday revealed that Posco had expressed a “strong desire” in buying the Whyalla steelworks, which was placed on administration earlier this year.

    “I met with Posco in South Korea and was joined by South Australian Treasurer Tom Koutsantonis and National Secretary of the Australian Workers Union, Scott McDine.

    “We stood together and made it clear that we are determined to work with any potential buyer for the steelworks to support the workers of Arrium and the Port Pirie community,” Hunt said on Thursday.

    “Posco briefed me on their future vision for Whyalla – where the plant not only continues current operations, but grows significantly. They don’t want Arrium to just be competitive domestically. They want Arrium to be globally competitive.”

    Hunt said Posco’s plans included expanding overall production at Whyalla by 50%, which would significantly boost steel output and would result in the creation of a new 220 MW power plant, which would meet Arrium’s own power requirements and assist in providing electricity supply and security for the state.

    “You couldn’t get a better outcome for South Australia – not just protecting the jobs but investing, expanding production and providing additional baseload grid security,” Hunt said.

    Koutsantonis for his part said that the state government had made clear to Posco that it stood ready to invest some A$50-million into the Whyalla operations, to make them more viable over the long term.

    “While the bid process is still a long way from completion it was clear from the meeting today that Posco has a serious interest in Arrium and the long-term future of the Whyalla operations, the local workforce and the Whyalla community as a whole.

    “Of particular interest is their world-leading manufacturing technology Finex, which produces steel identical in quality to steel from blast furnaces but with fewer input materials and less impact on the environment, and the potential to implement this technology in Whyalla.”

    Koutsantonis noted that the state government was also hoping to meet with other potential buyers over the coming months.

    However, Posco has denied interest in the Arrium assets, saying in a statement to Reuters that it was trying to sell the group the FINEXT technology.

    “Posco is not participating in bidding to buy Arrium. We are interested in selling our FINEXT technology to Arrium,” a spokesperson was quoted as saying.

    Arrium, which appointed the administrator in April, has steel-making capacity of about 2.5-million metric tons a year. Operations include the Whyalla steelworks and port, the OneSteel steel manufacturing, distribution and recycling unit and an iron ore mining division

    Marketing efforts for the Arrium Australia business started in August this year, with administrators favouring offers that will allow for the sale of the business in one line as a going concern, with a view to maximise value to credit holders.

    Shortlisted bidders are expected to submit final binding offers in December.
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    Adaro reports a 23% rise in 9M earnings

    Adaro Energy, a leading coal mining company in Indonesia, reported a core earnings of $281 million for the first nine months of 2016, a year-on-year rise of 23%, World Coal reported on November 2, citing the company's latest quarterly report.

    The rise in core earnings comes despite a 16% year-on-year fall in net revenue over the period, as cost efficiency initiatives at the company resulted in a 22% fall in the cost of revenue.

    Its coal production in the first nine months was level with the same period last year at 39.33 million tonnes, and remains on track to achieve 2016 production guidance of 52-54 million tonnes.

    The company produced 13.47 million tonnes of coal in the third quarter this year, rising 2% from the previous quarter, despite heavy rainfalls in July and September.

    Coal sales of Adaro stood at 40.45 million tonnes over the same period, falling 2% from the previous quarter and down 9% year on year.
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    CIL Oct output up 23pct on month, missing target

    Coal India Limited, India's largest coal miner, produced 43.51 million tonnes of coal in October, up 1.9% year on year and 23.47% month on month, the state-owned company said in a regulatory filing to the Bombay Stock Exchange on November 1.

    The output for October was 8.37 million tonnes below the target of 51.88 million tonnes.

    In the first seven months of the fiscal year 2016-2017 (April-March), CIL produced 273.57 million tonnes of coal, also missing the targeted output of 307 million tonnes.

    During the same period, CIL's coal sales to consumers totaled 292.16 million tonnes against the target of 331.76 million tonnes.

    Among this, CIL posted an offtake of 43.04 million tonnes in October versus the targeted 47.96 million tonnes, the company said.

    CIL has a production target of 598 million tonnes for the ongoing fiscal year and it is planning to produce 1 billion tonnes per year by 2020.
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    China calls another meeting to take coal miners to task for price rally

    labourer searches for usable coal at a cinder dump site on the outskirts of Changzhi, Shanxi province October 27, 2009. REUTERS/Stringer/File Photo

    China's state planner has called coal producers to a meeting on Thursday, its fourth last-minute gathering with the industry in two weeks, to admonish them for not doing enough to calm the red-hot market, according to a document seen by Reuters.

    In a notice, the National Development and Reform Commission (NDRC) said it sought to "prevent volatile coal prices moves," calling for a meeting "to admonish producers for not regulating their pricing activities."

    The gathering in Beijing was to be held at 2:30 p.m.

    The strongly-worded notice comes a week after the NDRC asked miners to cap their price limits on 2017 contracts and pressed them to sign more long-term deals, in an apparent effort to end the months-long rally the government has said is not justified by fundamentals.

    The NDRC did not respond to requests for comment.

    Experts and miners say the frequency of the gatherings reflect Beijing's increasing worries about runaway prices ahead of the winter.

    An official government newspaper reported on Thursday that major producer China National Coal Group Corp (ChinaCoal) has cut its thermal coal prices by 10 yuan per ton.

    Spot prices for 5,500 kcalorie thermal coal gained 4 yuan on Thursday to 697 yuan ($103.12) per ton, data provided by Fenwei Energy showed.
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    South32 to pay $200 mln for Peabody Australia coal mine

    Nov 3 Australia's South32 said on Thursday it will pay $200 million to acquire Peabody Energy's Metropolitan coal mine in Australia amid a resurgence in demand for coal to make steel.

    Peabody, the biggest U.S. coal miner, filed for bankruptcy protection in April after a sharp drop in coal prices left it unable to service its $10.1 billion debt, much of it incurred for expansion in Australia.

    The bankruptcy ranks among the largest in the commodities sector.

    "The Metropolitan Colliery is a natural fit within our portfolio and the acquisition is consistent with our strategy to invest in high quality mining operations where we can create value," South32 Chief Executive Graham Kerr said in a statement.

    The deal comes as coking coal prices stage a rally that's seen prices rise more than 200 percent this year to about $230 per tonne.

    A drop in domestic production in China has been cited for the increase.
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    ChinaCoal to cut coal price on rising supply expectations

    China National Coal Group Corp (ChinaCoal), China's second-largest state-owned coal producer after Shenhua Group, will cut its thermal coal price by 10 yuan ($1.48) per tonne from Thursday, as it expects rising coal production to ease prices, a government newspaper reported.

    ChinaCoal expected overheated coal prices to cool after the government's latest measures to speed up output hikes to alleviate the shortage, while coal shipments and inventories at ports and users have been rising, China Reform Daily reported late on Wednesday.

    The newspaper is owned by the National Development & Reform Commission (NDRC), the country's economic watchdog. Industry sources said the cut will only be imposed for physical settlement based on the Bohai-Rim Steam-Coal Price Index.

    The marginal cut is seen by industry sources as the first sign that coal producers may be falling into line with the NDRC, which has urged coal miners to sign long-term deals with utilities at a fixed price to ensure supplies and avoid a big hike in residential power costs.

    Top coal miners including Shenhua have declined to reach an agreement with power generators to set the prices for their 2017 long-term supply contracts at prices below market levels.

    China's thermal coal prices on the Zhengzhou Commodity Exchange edged lower by 0.5 percent to 634.8 yuan a tonne by 0248 GMT.

    However, open interest for the benchmark contract stood at 469,648 lots, not far off a record level hit on Monday. Traders had been expecting prices to go higher, but are waiting for clearer signals on any potential policy moves.

    The unexpected coal supply shortage and recent price spike followed moves by the Chinese government to slash capacity and shut coal mines as part of its efforts to tackle overcapacity.
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    Cloud Peak 3Q loss narrows on good demand

    Cloud Peak Energy, one of the largest coal producers in U.S., saw its loss narrow to $2.7 million in the first three quarters, compared with a loss of $48.7 million over the first nine months of 2015, World Coal reported on November 1.

    The company sold 17.1 million short tonnes (15.5 million tonnes) in the third quarter, compared with 20.8 million short t a year before.

    It realized revenue of $217.1 million over the same period, with a net loss of $1.6 million for the quarter.

    Cloud Peak's domestic coal shipments increased to an average of 5.7 million short tonnes per month in the third quarter, up from just 4.1 million short tonnes in the first quarter this year, thanks to a high coal burn at its customers' power plants amid strong summer electricity demand and increased natural gas prices.

    And the company expects more in the fourth quarter, noting that with natural gas prices moving above $3 per million Btu, some utilities are operating their coal units through the normal fall maintenance period.

    "During September, the company started receiving an increase in requested for proposals with customers looking to contract for more of their future requirements," the company said in its quarterly earnings statement. "There has been an increase in Powder River Basin pricing and the company is optimistic this trend will continue as coal demand recovers from the very low levels experienced in the first quarter this year."

    Following an uptick in global thermal coal prices, the company also reported a return to coal exports, saying it had sold around 1 million short tonnes to its Asian customers for delivery between November 2016 and February 2017.

    "The turnaround in international thermal coal prices has been significant," said Colin Marshall, the company's President and CEO. "If prices are sustained, we expect to be able to export additional tonnage next year."
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    Shagang Group raises early Nov steel price by 100-380 yuan/t

    China's largest private sector steelmaker Shagang Group raised prices by 100-380 yuan/t for its major products to be delivered over November 1-10, compared with late October, mainly supported by increased coke prices.

    The company raised prices of rebar by 100 yuan/t, hot-rolled steel by 380 yuan/t and medium plate by 260 yuan/t.

    As of November 1, billet price climbed 100 yuan/t in Tangshan from ten days ago to 2,320 yuan/t with 17% VAT, ex-plant basis.  

    Steel spot market was buoyant and bullish lately, with resilient rebar future prices and persistent rise of coke price.

    By the end of September, the steel and coal sectors had fulfilled more than 80% of de-capacity target for 2016, and were likely to reach the target ahead of end-2016.

    Analysts expected the steel market to fluctuate at a relatively high level in November, as steel stocks are unlikely to climb rapidly despite gradually released capacity.
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    As first cold snap of winter grips China, utilities face coal crunch

    As the first major cold snap of the winter grips northern China this week, utilities are desperately trying to overcome a shortage of the coal they need to produce power as customers crank up heating to fight the chill.

    With coal inventories languishing below 20 days of use, well under the five-year average, power companies will be forced to stick with their record pace of imports for the rest of the year, stoking an unprecedented rally that has seen international prices more than double in 2016.

    The rush for foreign coal used to make electricity showed no sign of easing this week, with the Pacific benchmark Newcastle coal price on Tuesday settling at its highest since early 2012 at $114.75 per tonne.

    One trader based in the major Rizhao coal port reported North Korean coal offered at as much as 800 yuan ($118.29) per tonne. The price could not be verified, but it would be almost 150 yuan above the current domestic market.

    "The price is insanely high, but there is a market for it," said the trader, declining to be identified as he was not authorized to speak to media.

    The crunch comes after Beijing pushed to slash local coal output as part of its 'war on pollution', underscoring the challenges of balancing ambitions for clean air with the reality of an economy that has relied so heavily on dirty fuels.

    It also follows an unusually cold winter last year and a blistering summer in some regions that drained inventories.

    Chan Yijun, head of consultancy Shanxi Fenwei Energy, said imports in the fourth quarter would remain at the all-time high set over the previous three months at about 60 million tonnes.

    Shipping data in Thomson Reuters Eikon shows China's seaborne coal imports were 20.03 million tonnes for October, the biggest monthly total since Thomson Reuters started assessing the figures in January 2015.

    In the short term, that kind of appetite could push prices up by another 100-200 yuan per tonne, an informal survey of five traders and analysts by Reuters showed, despite the government repeatedly saying there are no fundamentals to support further gains.


    Thomson Reuters Eikon weather data shows temperatures in Beijing are expected to remain around 2 degrees Celsius below the seasonal norm until at least mid-December, piling pressure on coal stocks.

    Low hydro levels, including at the massive Three Gorges Dam, have also been ramping up the burden on coal-fired power generation.

    In the first nine months of the year, China's accumulated supply deficit for thermal coal was more than 138 million tonnes compared with a surplus of 18.54 million tonnes in the same period last year, data provided by Fenwei Energy showed. The deficit is also more than the volume China imported in the first three quarters of 2016.

    That pushed weekly thermal coal inventory in early September to its lowest level since 2008. Though it has climbed slightly since, stocks have been hovering under 20 days of use since April, levels considered critically low, data shows.

    "Markets are worried that the pace of increase in coal output is not matching the surge in winter demand," said Shanxi Fenwei's Chan.

    Only after the winter, well into 2017, will domestic stocks likely be replenished as Chinese mines step up output again, helping ease prices.

    In a reversal of its previous pledge, China's state planner has allowed 900 coal mines to boost thermal production, upping output by 1 million tonnes per day.

    It has also asked the nation's top coal miners to cap their 2017 supply contracts at or below current spot market levels, sources said, a highly unusual move that reflects Beijing's growing panic about runaway prices.

    "A key question hanging in everyone's mind is how fast coal mines can ramp up production to help relieve worries," said Zhang Xiaojin, a Zhengzhou based analyst with Everbright Futures.

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    Hohhot railway raises coal freight rate by 10%

    Hohhot railway bureau in China's Inner Mongolia autonomous region raised rail freight rate for both coal and coke by 10%, effective November 1, said industry insiders, citing a notice released by the bureau lately.

    It is expected to bring about a 19-20 yuan/t increase in rail freight for coal delivered from Inner Mongolia to northern ports in China, said industry insiders.

    Some other railway authorities had adjusted rail freight rates in mid-October, adding further cost to coal deliveries that have been hit by increased cost from stricter truck transport rules.

    The Taiyuan and Zhengzhou railway bureaus resumed the standard freight rate set by the central government by cancelling the previous 10% discount.

    The Xi'an bureau called off a 0.01 yuan/ discount for coal deliveries within its administration, while the Urumchi Bureau also increased freight rate by 5% from the national standard.

    The demand for coal will continue to swell with the coming of peak winter demand in northern China, and downstream utilities are still seeking to replenish coal stocks.
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    China's major steel city sees lower furnace operation amid costlier coal

    Tangshan city in Hebei province, a major steel producing city in northern China, saw the operating rate of steelmaking furnaces down to only 80%, compared with some 90% in previous months, local media reported.

    The surveyed small and medium-sized steel makers reported furnace operating rate at 88.94% by October 27, falling sharply from the 90.82% on September 22, data showed.

    The price rally of coking coal, a major steelmaking material and accounting for nearly 40% of steel production cost, has been dragging down steel makers' profit closer to the break-even point, driving steel mills to suspend operation of some furnaces to avoid losses.

    Hebei Metallurgical Industry Association data showed that the steel sector PMI in Hebei stood at 49.1 in October, up from 47.8 in September, mainly attributed to the rising new order sub-index. Yet steel enterprises' profitability did not notably improve under pressure of higher cost.

    Meanwhile, a large number of furnaces have started maintenance, as Hebei province began to speed up in completing its capacity cut target by end-November.

    The domestic steel market is likely to see both weak demand and supply in the rest months, as furnace maintenance may increase and steel mills will pick up pace in slashing surplus capacity.
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    Severstal says exports Chinese cold rolled steel to EU on low duties

    Severstal, one of Russia's largest steelmakers, said it was exporting Chinese cold rolled steel to the European Union, instead of Russian steel, because EU anti-dumping duties on the Chinese product are much lower.

    That is likely to rile European steelmakers who have long argued duties on Chinese steel are not high enough to prevent the products from coming into the EU and undercutting them.

    "We've started buying Chinese cold rolled for our steel service centres. There are very low duties on Chinese (cold rolled) so we're better off bringing (the steel) in from China," said chief executive Vadim Larin.

    The EU in August imposed duties of up to 22.1 percent on Chinese cold rolled steel and of up to 36.1 percent on the equivalent Russian product, used in the construction and the automotive industries.

    The duties were the latest in a long line of EU trade defences in steel set up over the past two years to counter what EU steel producers say is a flood of steel sold at a loss due to overcapacity.

    Larin said cold rolled steel sales to the EU accounted for around 2 percent of Severstal's total sales, while hot rolled EU steel sales accounted for about 6 to 7 percent of the company's total sales volumes.

    The European Commission is also investigating alleged dumping of hot-rolled steel by producers in Brazil, Iran, Russia, Serbia and Ukraine. That could lead to duties imposed by April next year.

    "If the (hot rolled steel) duties are imposed it will affect us. We will have to move volumes from Europe to farther regions and we will lose margins," said Larin.

    Severstal, controlled by Russian billionaire Alexei Mordashov, sells just a third of its steel in Russia. It reported a rise in third quarter core profits last week, helped by lower costs and a global recovery in steel prices.

    Larin said he sees demand for steel in Russia rising some 2 percent next year versus a fall of some 6 percent this year, as the Russian economy should emerge from two tough years to record marginal growth.

    Russia is the world's fifth largest steel producer and exporter while China is the world's largest.
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    South32 suspends production at NSW coal mine

    Diversified miner South32 expects to lose about 500 000 t of output at its Appin coking coalmine, after elevated gas concentrations forced the temporary suspension of production at the New South Wales mine.

    Longwalls 7 and 9 were suspended to enable an investigation to be completed, with South32 telling shareholders this week that the elevated gas concentrations resulted from the failure of a ventilation fan. The issue has been rectified.

    However, having restarted operations at the longwall Area 9, it became apparent that the outage had exacerbated challenging ground conditions, and the company took the decision to suspend production to complete remedial work.

    The work is expected to take four weeks to complete.

    The Appin Area 7 longwall will run at a reduced rate before ramping up to full capacity once the necessary test confirmed that methane gas concentrations could be maintained at safe levels.
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    China Oct steel sector PMI rebounds to 50.7

    The Purchasing Managers Index (PMI) for China's steel industry rebounded to 50.7 in October, compared with 49.5 in the previous month, showed data from the China Federation of Logistics and Purchasing (CFLP) on November 1.

    It hit a five-month high, indicating a strengthened steel industry, and the industry is expected to continue the upward trend in the coming slack season.

    In August, the steel industry output sub-index was 50.7, gaining 0.5 from 50.2 in September, posting the fourth consecutive reading above the 50-point mark that separates growth from contraction on a monthly basis.

    Meanwhile, the new orders sub-index reached 54.6, compared with 49.2 in the previous month, encouraged by rising steel prices amid the national capacity cut drive.

    Besides, the purchase price index bounced up from 56.6 in September to 68.3 in October, the highest level in recent six months, indicating robust demand for steel-making materials from steel mills.

    China's steel prices have been on the increase since this year, yet the profit of steel makers is gradually eroded by rallying prices of steelmaking material, which was mainly caused by China's capacity cut policy at coal mines.

    However, steel mills tend to maintain high furnace operating rate in the short run despite narrowing profit.
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    Mongolia Jan-Sep coal exports soar 58.8pct on year

    Coal-rich Mongolia exported 16.7 million tonnes of coal over January-September this year, soaring 58.8% from 10.51 million tonnes the same period last year, showed data from the Mineral Resources Authority of Mongolia.

    In September, coal exports of the country reached 2.55 million tonnes, sliding 6.7% from 2.73 million tonnes in August, the data showed.

    Exports of washed coking coal decreased 19.6% on month to 0.13 million tonnes in September, while that of raw coking coal dropped 13.4% from August to 1.08 million tonnes.

    The country exported 0.47 million tonnes of thermal coal in the month, falling 36.3% on month.

    In the first three quarters, Mongolia produced 20.72 million tonnes of coal, with output in September gaining 12.5% on month to 3.07 million tonnes.

    Its coal output stood at 24 million tonnes last year, down 1.64% year on year.

    Over January-September, Mongolia sold 21.33 million tonnes of coal, with domestic sales at 4.63 million tonnes or 21.71% of the total.

    In September, coal sales edged up 1.09% on month to 3.17 million tonnes, with domestic sales down 54.7% on month to 0.62 million tonnes or 19.6% of the total.
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    Glencore restarts Australia coking coal mine

    Glencore plans to restart mining activities at the Integra underground coking coal mine, in the Hunter Valley, as the price of metallurgical coal continues to rise.

    Glencore acquired the Integra mine, then known as Glennies Creek, from major Vale last year. The mine has been on care and maintenance since July 2014.

    Glencore said on Tuesday that the Integra mine would produce 1.3-million tonnes a year of high fluidity saleable coking coal in 2017, to meet a specific need identified in the metallurgical coal market.

    However, with a number of the company’s thermal coalmines having recently closed, or reaching the end of their scheduled mine life, production at Integra was not expected to increase Glencore’s overall coal sales from Australia.

    The company is hoping for an early 2017 restart.
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    China's coal price fever chills power plants

    North China has been caught by sudden cold snap with temperatures already sub-zero, but local power plants have been feeling the chill for a long time as soaring coal prices stripped their profits away, state-run media Xinhua News Agency reported.

    China's five largest power companies saw their combined coal-fired business lose 300 million yuan ($45 million) in September, the first group loss since August 2012.

    GD Power Development saw revenue shrink in the first nine months, with net profits down about 4% in the third quarter year on year. Shanghai Electric Power saw its profit fall by 10.3% in the third quarter.

    "The high coal price is eating away our profit and there are worries that a short-term shortage might push the price higher," said Liu Shenghan, sales manager of a power company in Shanxi Province, where 30 of 52 coal-fired power plants made losses in the first nine months.

    On October 31, the Fenwei CCI Thermal index assessed 5,500 Kcal/kg NAR coal at 678 yuan/t FOB including 17% VAT, a rise of 312.5 yuan/t from the start of the year, showed data from China Coal Resource (, a China-focused coal information portal.

    Coal supply fell short of demand from utilities following rapid price increases in the past few weeks, as hydroelectric generation is falling with the end of rainy season.

    While rising prices, and profits along with them, might tempt some faltering enterprises to expand production, the policy of cutting overcapacity is not negotiable and a long-term structural overhaul remains the primary objective, according to Sheng Laiyuan of the National Development and Reform Commission (NDRC).

    Since the end of September, the NDRC has called a number of industry-wide meetings, striving to cool price fever while ensuring stable supplies in the last quarter of the year. At one of those meetings last week, medium-to-long-term supply and price contracts were on the agenda, as a win-win solution -- rationalizing the supply chain and securing demand.

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    China's coal imports surge again

    China's imports of coal from the seaborne market surged again in October, thereby justifying the jump in prices but also raising questions as to how much more of the fuel the world's top buyer can suck in.

    Seaborne coal imports were 20.03 million tonnes for October, according to vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.

    This is the highest monthly total since Thomson Reuters stated assessing the data in January 2015, and shows that China's appetite for imports remains undiminished in spite of a spike in the prices of both thermal and coking coal.

    The seaborne data doesn't exactly match Chinese customs data as it excludes shipments from North Korea and overland from Mongolia, as well as coal that arrives on small vessels or barges. It may also be revised slightly in coming days as more data becomes available on when ships discharged cargoes.

    However, seaborne imports are what matters from a market pricing perspective, as cargoes from North Korea and Mongolia tend not to affect the regional price benchmarks.

    The seaborne imports for October are almost 3 million tonnes above the 17.06 million assessed for September, which represents a significant jump and will no doubt have contributed to a tightening of the market.

    The benchmark Australian thermal coal price, the Newcastle weekly index, rose to $105.81 a tonne in the week ended Oct. 28, the most in 4-1/2 years and 109 percent higher than at the end of last year.

    Australian premium hard coking coal .PHCC-AUS=SI, the regional benchmark for coal used in steel-making, rose to $257.70 a tonne on Monday, more than three times the $78.20 it fetched at the end of last year.

    Despite these stellar gains, it's becoming harder to see how they can be sustained, especially since history shows that any spectacular rally is normally followed by a collapse.

    While China's decision to cut its domestic coal output has no doubt been the driver of coal's gains this year, the question is how quickly can the Chinese reverse course, and how rapidly can coal exporters ramp up output to meet Chinese demand?

    China's total coal output dropped 10.5 percent to 2.46 billion tonnes in the first nine months of the year compared to the same period in 2015, while imports have gained 15.2 percent to 180.18 million tonnes.

    In volume terms, China's production is down by about 300 million tonnes in the first nine months of 2016, while imports are up by about 23 million tonnes.

    This shows that higher imports have only compensated for about 7.6 percent of the drop in domestic output.


    What this means is that what China does with domestic output will have a far bigger bearing on the future of coal prices than anything coal exporters such as Australia, Indonesia and South Africa can do.

    China has asked miners to quickly ramp up output ahead of the northern winter, and to cap prices at or below current spot market levels.

    For thermal coal with a heating value of 5,500 kilocalories per kilogram, this implies a price of around 660 yuan a tonne, equivalent to about $97.48 a tonne, which is slightly below the current free-on-board price of Newcastle coal, which is of similar quality.

    This implies that as soon as China can ramp up domestic coal output, the price of seaborne coal will likely fall to a level where it can compete, once freight and taxes are added.

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    In surprise move, Japan's Nippon Steel retains annual profit outlook

    Nippon Steel & Sumitomo Metal Corp posted a plunge in profits for the six months to September, but the top steelmaker of Japan defied estimates by retaining its annual outlook at a time when higher raw material costs have led to a cut by others.

    Japan's second- and third-biggest steelmakers, JFE Holdings Inc (5411.T) and Kobe Steel Ltd (5406.T), halved their forecasts for the year to March 2017, citing a three-fold rally in prices of coking coal - a key steelmaking ingredient. But Nippon Steel held its earnings target steady on hopes of passing on costs to buyers and more-than-expected contributions from overseas units.

    "We are strongly committed to seek an increase in product prices from our customers as the price rise levels of coking coal are too much for us to absorb on our own," said Nippon Steel's executive vice president, Toshiharu Sakae.

    "Looking at the recent orders from customers, we see solid demand in auto and construction segments in Japan while an overall demand in Southeast Asia, our mainstay overseas market, is also strong," he said at a news conference on Tuesday.

    Analysts, however, were not so sure as indicated by the fact that over the past 30 days, six analysts trimmed their annual earnings estimates for Nippon Steel by 29 percent on average, according to Thomson Reuters.

    While Nippon Steel is seeking an increase in product prices of about 10,000 yen ($95.2) per ton, analysts such as SMBC Nikko Securities' Atsushi Yamaguchi believe it will not be easy to pass on the whole burden given a glut in Asia - home to China, the world's biggest producer and consumer of steel.

    Nippon Steel expects 130 billion yen in recurring profit for the year to March, exceeding an average estimate of 96 billion yen by the six analysts.

    For the first half, Nippon Steel's recurring profit fell 78 percent from a year ago due to lower product prices, slack demand in high-margin seamless pipes used for drilling oil fields and the yen's rise against the dollar.

    JFE posted a recurring loss while Kobe Steel booked a 63 percent slide in recurring profit for the period. Costly coking coal is now expected to pressure their results in the second half.

    Premium hard coking coal prices .PHCC-AUS=SI in Australia, which dominates global exports, rose to over $257 a ton this week, bringing the rally in 2016 to more than 200 percent after China moved to cut overcapacity in its coal sector.

    "Things may change in a year or so, but given China's effort to tackle the overcapacity issue, coking coal prices may stay at high levels at least until March," JFE Executive Vice President Shinichi Okada said on Friday, pointing to the steelmaker's assumption of prices at $200 for the October-March half.

    Steel prices SRBcv1 in China have spiked 50 percent this year amid Beijing's efforts to reduce a crippling overcapacity in the sector, but Okada said the market was not in a real recovery phase yet due to excess supply
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    Coal producer Shenhua's profit rises 46% in Q3

    Coal producer Shenhua's profit rises 46% in Q3
    China's largest coal producer saw profit jump 46 percent in the third quarter amid a price surge following the government's efforts to curb the oversupply.

    Net income at China Shenhua Energy Co, the biggest coal miner in the world's largest energy consumer, rose to 7.48 billion yuan ($1.1 billion) from about 5.1 billion yuan in the same period last year, the Beijing-based company said in a statement to the Shanghai Stock Exchange.

    Coal prices have made a comeback after five years of declines because of a reduction in domestic supply.

    The central government earlier this year ordered miners to operate for the equivalent of 276 days of production, down from the standard 330 days, as part of its efforts to revitalize the industry and curb industrial overcapacity. This helped spur the nation's benchmark power-station coal prices more than 70 percent so far this year.

    "Shenhua and China Coal Energy Co have obviously benefited from the coal price surge in the previous quarter," Leo Wu, an analyst with Guotai Junan Securities Co, said before the earnings were released. "China Coal's output decline should have been offset by the price gain."

    China Coal, the second-biggest miner, said on Friday that net income swung to a 401.3 million yuan profit in the first nine months of the year from a loss of 1.59 billion yuan in the same period last year.
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    Shenhua 4 Mtpa CTL project goes into operation

    Shenhua Ningxia Coal Industry Group Co., Ltd., one branch of China's coal giant Shenhua Group, put its coal-to-liquids (CTL) project into official operation, following the successful production of refined methanol on October 29, local media reported on October 31.

    The indirect coal liquefaction project is China's second coal deep processing demonstration project following Shenhua's direct coal liquefaction project in Ordos, and the world's largest single CTL facility.

    The project is designed to produce 4.05 million tonnes of oil products and 1 million tonnes of methanol per year, according to the report.

    Major products include diesel, naphtha and liquefied petroleum gas, with designed annual output at 2.73 million, 0.98 million and 0.33 million tonnes, respectively.
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    Indian steel industry opposes anti-dumping duty on met coke import

    The Indian steel industry has petitioned the Prime Minister's Office (PMO) against the move to impose anti-dumping duty on imports of low-ash met coke from Australia and China, saying that such an impost would result in price increases of R750-1,500/t ($11.25-22.5/t) for finished steel products, The Financial Express reported.

    Stating that the percentage of met coke in the total cost of crude steel is 40-50%, the Indian Steel Association (ISA), in a letter to Nipendra Mishra, principal secretary to the Prime Minister, has said domestic coke suppliers are unable to supply met coke with required specification for larger-size blast furnaces.

    "The larger blast furnaces with capacity of more than 1,200 cubic metres necessarily require met coke with low ash content and moisture content of less than 5%, to ensure that the blast furnaces run efficiently as any variation in coke quality results in instability in thermal profile which takes a long time to stabilise," ISA said, adding that the use of domestic met coke has an adverse impact on the steel production and blast furnace productivity.

    Fearing that their business would be in jeopardy due to cheaper imports, domestic met coke producers including Gujarat NRE Coke had earlier filed an application with the directorate general of anti-dumping (DGAD). Met coke prices rose sharply in recent times from $121/t in January to $285/t now.

    "The imposition of anti-dumping duty will accentuate the already worsened situation by increasing the prices of inputs. We urge the government no anti-dumping duty on met coke should be levied for use in steel sector in India," said the ISA.
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    China's coal price fever chills power plants

    North China has been caught by sudden cold snap with temperatures already sub-zero, but local power plants have been feeling the chill for a long time as soaring coal prices stripped their profits away, state-run media Xinhua News Agency reported.

    China's five largest power companies saw their combined coal-fired business lose 300 million yuan ($45 million) in September, the first group loss since August 2012.

    GD Power Development saw revenue shrink in the first nine months, with net profits down about 4% in the third quarter year on year. Shanghai Electric Power saw its profit fall by 10.3% in the third quarter.

    "The high coal price is eating away our profit and there are worries that a short-term shortage might push the price higher," said Liu Shenghan, sales manager of a power company in Shanxi Province, where 30 of 52 coal-fired power plants made losses in the first nine months.

    On October 31, the Fenwei CCI Thermal index assessed 5,500 Kcal/kg NAR coal at 678 yuan/t FOB including 17% VAT, a rise of 312.5 yuan/t from the start of the year, showed data from China Coal Resource (, a China-focused coal information portal.

    Coal supply fell short of demand from utilities following rapid price increases in the past few weeks, as hydroelectric generation is falling with the end of rainy season.

    While rising prices, and profits along with them, might tempt some faltering enterprises to expand production, the policy of cutting overcapacity is not negotiable and a long-term structural overhaul remains the primary objective, according to Sheng Laiyuan of the National Development and Reform Commission (NDRC).

    Since the end of September, the NDRC has called a number of industry-wide meetings, striving to cool price fever while ensuring stable supplies in the last quarter of the year. At one of those meetings last week, medium-to-long-term supply and price contracts were on the agenda, as a win-win solution -- rationalizing the supply chain and securing demand.

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    China Jan-Sept steel exports rise by 2.4%

    The Asian market has been the main contributor to the growth of steel exports in the first nine months of this year, according to a top official of the China Iron & Steel Association in a news release.

    Steel exports in the first nine months stood at 85 million metric tons, up 2.4 percent from the same period last year.

    Wang Yingsheng, deputy president of CISA, said that the 2.4 percent steel export volume growth in the first three quarters was generated by the Asian market, especially the emerging markets where construction demand is high.

    He said that given the current situation, steel exports to Asia are not going to drop. With the Belt and Road Initiatives, they are expected to increase.

    The number of anti-dumping and anti-subsidy cases overseas was 38 in the first three quarters, compared to 37 in the whole year of 2015.

    "Increasing trade frictions have prompted many steel companies to stabilize their overseas market and turn to direct sales, circumventing trade companies so that they have first-hand information on the requirement of their buyers," said Wang.

    Wang said that developed countries' demand for steel has remained lackluster since the financial crisis in 2008, while demand in Asia, especially ASEAN countries, has been on the rise.

    "Locally produced steel in countries in Asia and the Middle East is generally of small volume, creating markets for China's exports," said Wang.

    This year has seen the steel market rebounding from across the board losses last year. The 373 CISA-member steel smelters, which account for around 80 percent of the country's capacity, had 25.2 million yuan ($3.7 million) profits.

    "The main driver for profitability this year is the significant reduction of costs. It should be noticed that the profit rate (net profit/cost) is merely 1.27 percent, far lower than the average 5 percent among industrial companies. Therefore, steel companies' profitability is still very vulnerable," said Chen Yuqian, director of the fiscal and asset department of CISA.

    The main consumers of steel in the fourth quarter will be real estate, construction and machinery manufacturing, said Chen.

    "Property, transportation, environmental-management and irrigation facilities will generate a lot of demand for steel. Machinery manufacturing, such as automobile production, which has been growing by roughly 10 percent year-on-year in recent years, is also a key engine of steel demand. Yet the demand won't be robust in the rest of the year," said Chen.

    Chen warned that the increase in steel output in the fourth quarter needs to be closely monitored to avoid price wars if supply outstrips demand.
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    Tangshan cuts 32 Mtpa of steel capacity

    Tangshan, a major steel producing city in northern China's Hebei Province, has cut 31.86 million tonnes per annum (Mtpa) of steel capacity in the past four years, local authorities said on October 30.

    Tangshan had a steel capacity of 150 Mtpa before 2013, but its annual output then stood at about 100 million tonnes, the municipal government said.

    According to the Hebei provincial government, Tangshan needed to cut 40 Mtpa of steel capacity in the five years to 2017. So far this year, the city has closed 8.29 Mtpa of capacity, meeting its annual target.

    China's steel sector has been through years of plunging prices and factory shutdowns. Cutting overcapacity is high on the reform agenda as excess capacity has weighed on the country's overall economic performance.

    By the end of October, the city has slashed 18.67 Mtpa of iron capacity during the past four years. It also cut down 7.80 Mtpa of the material entering 2016, fulfilling its annual target.

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    China asks coal miners at latest meeting to cap 2017 prices - sources

    China's government has asked the nation's top coal miners to cap their 2017 supply contracts at or below current spot market levels, sources said, a highly unusual move that reflects Beijing's growing panic about runaway prices.

    The National Development and Reform Commission (NDRC) at an emergency meeting on Thursday asked miners to agree to set the prices for their 2017 long-term supply contracts at or below 12 cents per kilocalorie (kcal) for 5,000 kcal thermal coal and for 5,500 kcal thermal coal, two sources who were briefed on the meeting told Reuters.

    Those prices are equivalent to 600 yuan ($88.63) per tonne and 660 yuan per tonne respectively, according to Reuters calculations.

    This was the third meeting that the NDRC, China's top economic planner, has held with the coal industry in a week and the participants included state-owned Shenhua Group Corp, the nation's largest miner, the sources said.

    The sources asked to remain anonymous as they are not authorized to speak to the press.

    The NDRC did not respond to requests for comment.

    No agreement was reached in the meeting, but the sources expect negotiations overseen by the government to continue over the next few months.

    Coal prices have skyrocketed over the past two months to record highs as government-enforced mines closures choked supplies to power companies and forced many to import feedstock.

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    Rio Tinto, Chinalco agree non-binding deal for stake in Guinea's Simandou

    Major miner Rio Tinto announced an agreement on Friday to sell its stake in a project to develop the world's biggest untapped iron ore reserves in Guinea to Chinalco.

    Rio has a 46.6 percent stake in the Simandou project, while Chinalco, a state-owned Chinese metals producer, has 41.3 percent and the Guinea government owns 7.5 percent.

    If the deal goes ahead, Rio Tinto will receive payments of $1.1 billion to $1.3 billion based on the timing of the development of the project, it said in a statement, adding the aim was to seal a final deal in less than six months.

    Although the project holds huge potential, Rio has voiced its frustration over drumming up financing.

    In August, Rio CEO Jean-Sebastien Jacques said there had been no progress on finding infrastructure funding for the project and in October the International FinanceCorporation (IFC), an arm of the World Bank, said it was exiting the project.

    The West African country is counting on the project to spur economic growth after Guinea was hit by a crippling Ebola epidemic that officially ended in June.

    When fully operational, Simandou has the potential to double Guinea’s GDP, the project partners have said, while China, the world's largest iron ore consumer provides an obvious market.
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    Daqin Railway net profit slump 54pct in 3Qs

    Daqin Railway Co., Ltd., the operator of China's leading coal-dedicated Daqin rail line, saw its net profit slide 54.01% to 5.15 billion yuan ($768.1 million) in the first three quarters of the year, the company said in its quarterly report on October 27.

    Operation income of the company dropped 21.8% on year to 31.59 billion yuan in the same period, data showed.

    The decrease was mainly due to slumped coal transport demand and a 0.01 yuan/ cut in rail coal transport freight from February 4 this year, the company said.

    Daqin is losing its dominance in transporting coal from western China to the east, due to reduced coal demand amid China's de-capacity campaign, miners' output cut and the operation of other railways such as Zhunchi (Zhunger- Shenchi) line.

    Daqin's coal transport stood at 241.73 million tonnes in the first nine months, falling 20.75% year on year.
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    Japan steelmaker JFE says surging coal prices to hit profits

    Japan's second-biggest steelmaker JFE Holdings Inc halved its full-year profit forecast on Friday, blaming the recent surge in prices for coking coal.

    "We hadn't expected coking coal prices to climb this much," JFE executive vice president Shinichi Okada told a news conference.

    "Things may change in a year or so, but given China's effort to tackle overcapacity issue, coking coal prices may stay at high levels at least until March," he said, pointing to the company's assumption of coking coal prices at $200 per tonne for the October-March half.

    Spot prices for premium hard coking coal .PHCC-AUS=SI in Australia, which dominates global exports, this week surged to over $250 a tonne.

    That took the rally so far this year to more than 200 percent, after China moved to cut overcapacity in its mammoth coal sector. Coking coal is used to produce steel.

    JFE, the world's No.8 steelmaker in 2015, now expects its annual consolidated recurring profit for the current financial year to come in at 30 billion yen ($285 million), down from its previous estimate of 65 billion yen and an actual profit of 64.2 billion yen a year earlier.

    The revised guidance missed a consensus forecast of 55.26 billion yen in a Reuters's poll of 11 analysts.

    For the April-September half, it booked a recurring loss of 10 billion yen, versus a profit of 48.4 billion yen a year earlier, hit by a weak steel market and a stronger yen, which has climbed more than 10 percent against the U.S. dollar this year.

    Steel prices in China have rallied 50 percent this year as Beijing's efforts to reduce a crippling overcapacity in the sector there have led to lower inventories of the alloy.

    Still, Okada said the market is not in a real recovery phase yet due to excess supply.

    Blaming poor earnings, JFE skipped paying an interim dividend and did not give a dividend prediction for the second-half.

    The company stuck to its crude steel output plan of above 28 million tonnes on a parent basis for this year, above 27.36 million tonnes a year earlier.
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