Mark Latham Commodity Equity Intelligence Service

Friday 5th May 2017
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    Oil and Gas


    Glencore maintains steady Q1 production

    Production in the first quarter of the year across several of triple-listed Glencore’s operations worldwide was marred by adverse weather conditions, including Cyclone Debbie in Australia, flooding in Peru and higher-than-average rainfall in the Democratic Republic of Congo (DRC) and Hunter Valley, in Australia.

    However, the global diversified natural resource company reported steady output for the first three months of the year, with weather-related impacts somewhat offset by planned ramp-ups, drawdowns from stockpiles, improved grades and operating efficiencies, besides others.

    Glencore on Thursday reported that copper production from its own sources declined 3% year-on-year to 324 100 t, reflecting the grade variations at Alumbrera, in Argentina; the zinc/copper mix at Antamina, in Peru, as its mine plan progresses; and weather-related disruptions at Mutanda, in the DRC, and Antamina.

    These were partly offset by a 16% increase in own sourced production from North Queensland.

    The group‘s own-sourced zinc production of 279 200 t during the first quarter represented a 9% rise on the prior corresponding quarter, owing to the mine plan sequencing at Antamina and higher grades at the Kidd mine, in Canada.

    “Modest production increases in the rest of the portfolio were within expected ranges. There are currently no plans to restart idled capacity in Australia and Peru,” Glencorecommented.

    Meanwhile, own-sourced nickel production for the three months under review decreased 10% to 24 900 t owing to maintenance stoppages at Murrin Murrin, in Australia, and Nikkelverk, in Norway, and partially offset by the ramp-up at Koniambo, in New Caledonia.

    Operating efficiencies and the restarting of a furnace in the second half of last year contributed to a 10% year-on-year hike in Glencore’s attributable ferrochrome production for the first quarter of 2017 to 439 000 t.

    Coal production for the first quarter increased 4% year-on-year to 30.9-million tonnes, attributed to stronger coking coal production, the geological challenges experienced in the base period at Oaky Creek, in Australia, and planned ramp-ups in the Australian thermal portfolio.

    However, production was down 6% quarter-on-quarter on the back of adverse weather conditions in Australia and South Africa.

    “Glencore’s oil entitlement interest of 1.4-million barrels was down 43% on the first quarter of 2016, reflecting ongoing depletion. A single-rig drilling campaign will recommence in Chad in the second half of 2017,” the company commented.

    Meanwhile, Glencore hiked its full year 2017 marketing earnings before interest and tax guidance to between $2.3-billion and $2.6-billion, from the previous $2.2-billion to $2.5-billion.

    The company’s 2017 production guidance is 1.3-million tonnes for copper; 1.1-million tonnes for zinc; 300 000 t for lead; 120 000 t for nickel; 1.6-million tonnes for ferrochrome and 135-million tonnes for coal.
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    China's Renewed Drive to Tame Its Debt Pile Starts to Bite

    Image titleChina's Renewed Drive to Tame Its Debt Pile Starts to Bite

    Issuance of WMPs, trust products, NCDs tumbled in April
    Regulators issued flurry of new rules in the past month

    Signs are emerging that the Chinese government’s renewed drive to curb financial leverage is starting to bite.

    The number of wealth-management products issued by Chinese banks slumped 39 percent in April from the previous month, while trust firms distributed 35 percent fewer products, according to data compilers PY Standard and Use Trust. Sales of negotiable certificates of deposit, a popular instrument of interbank lending known as NCDs, tumbled 38 percent from a record, figures compiled by Bloomberg show.

    The system-wide contraction is a result of a flurry of government measures over the past month that included ordering banks to bolster risk controls, stepping up scrutiny of shadow financing and cracking down on malfeasance among senior bureaucrats. While the moves have rocked China’s financial markets, the government is sending a clear signal of its determination to curb the estimated $28 trillion debt pile that poses a risk to economic stability.

    “The government is doing the right thing to carry out the deleveraging efforts now,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “It seems the growth momentum currently can still absorb the negative impact of deleveraging, and that in turn provides the room for the deleveraging to continue.”

    The Chinese economy has grown for two straight quarters, though a bigger-than-expected drop in the official factory order gauge this week took the shine off a recent run of solid data points. The decline in the purchasing managers index is another indication of the delicate balance the government faces in maintaining growth, while curbing the leverage that helped fuel that expansion.

    Market Rout

    The recent regulatory moves erased more than $300 billion of stock-market value and sent bond yields to the highest level in nearly two years as investors speculated the crackdown will curtail the amount of funds available for investment in financial markets.

    It’s a valid concern: Chinese banks sold 5,989 wealth-management products last month, down from March’s 9,829, which was the highest since at least December 2015, according to PY Standard, a Chengdu-based financial data provider.

    Meanwhile, trust companies raised about 80 billion yuan from selling 543 products in April, compared with the 189 billion yuan raised from 835 products in March, according to Use Trust, which is based in the city of Nanchang.

    Sales of NCDs, which have become increasingly popular among smaller banks as a funding source, tumbled to 1.32 trillion yuan in April from a record 2.2 trillion yuan a month earlier, according to data compiled by Bloomberg.

    The impact of the regulatory crackdown has already turned up in bank profits after the measures drove interbank borrowing costs to a two-year high. First-quarter results announced last week showed that net interest margins for some smaller banks contracted, while margins for net lenders on the interbank market expanded.

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    Glencore raises profit forecast for trading arm

    Mining and commodities trading group Glencore has raised its operating profit forecast for the trading division this year by $100 million and said its mining operations were expected to recover from some weather-related disruption at the start of the year.

    First-quarter production figures were lower for commodities such as copper and zinc than some analysts forecast.

    But they said Glencore's upward revision for its trading division - to between $2.3 billion and $2.6 billion from $2.2 billion to $2.5 billion - suggested that results for the full year would not suffer.

    So far this year the share price performance has been positive, extending gains made in 2016 when it was one of the top performers on the FTSE 100 index .FTSE, while other big miners have pared last year's gains.

    Copper production in the first quarter this year was 3 percent lower than a year ago, following lower grade quality in some mines as well as flooding in Peru and higher than average rainfall in Democratic Republic of Congo.

    Zinc production was up 9 percent, Glencore said, adding there were no plans to restart idled capacity in Australia and Peru.

    Coal production was 4 percent higher than a year ago, reflecting stronger coking coal output compared with a year ago and increases in Glencore's Australian thermal coal operations.

    The world's largest shipper of seaborne coal is expected to benefit from higher coal prices.

    Glencore said Newcastle coal prices were 61 percent higher than the first quarter a year ago.

    In a note BMO, which rates Glencore shares as a "market perform", said catching up to reach full-year production targets was possible as much of the shortfall was weather-related and the increase to trading guidance was positive.
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    We're not the only ones pointing at the significance of Blockchain.

    Imagine you’re at an exhibition in the early 1990’s and among all the exotic stands and vendor pitches there’s a small table manned by someone who looks like they’re from the IT dept. Let’s call him Tim. He’s a very amiable chap and he explains something called Hypertext Transfer Protocol to you. He says you can call it HTTP for short.

    It’s a very technical explanation and he can’t really show you a sexy promotional video. It all sounds a bit complicated and you can’t really picture a use for it. There are no decent goody-bags in evidence. Your attention drifts over to the team demonstrating the radio-controlled fragrance balloons at a nearby stand and you don’t think about HTTP again.

    HTTP became the foundation of data communication for the world wide web. I don’t think any of us could have anticipated how fundamental it would become to our way of life in such a comparatively short time, let alone the diversity of services it would enable.

    A Few Players Dominate
    Despite that flourishing of diversity, the network is increasingly dominated by a small number of commercial operators. We use their products and services because, well, they can be hard to avoid. Google, Amazon, Facebook, Apple and a handful of others own the means of digital production, to misquote Karl Marx. Users are reduced to a kind of digital proletariat, watching the big players harvesting their valuable personal data and profiting from it.

    Enter the blockchain. We’re back at that imaginary exhibition but now it’s almost 20 years later - 2009. There are lots of stands demonstrating apps that you can download from a raft of recently created “app stores”. Everybody is very excited about something called Twitter.

    There’s another small table near the fire exit and it’s being manned by someone who looks like they’re from the IT department. Let’s call him Tim. He’s a very amiable chap and he explains something called the blockchain to you.

    It’s a very technical explanation and he can’t really show you a sexy promotional video. It all sounds a bit complicated and you can’t really picture a use for it. There are no decent goody-bags in evidence. Your attention drifts over to the team demonstrating a music streaming service called Spotify and you don’t think about the blockchain again.

    A Decentralising Force
    The blockchain could be a technological development as important as the web. As the ability to control the network is increasingly consolidated in the hands of fewer and fewer parties, blockchains decentralise power. Like Tim at the exhibition, I struggle to provide a simple, non-technical explanation of the blockchain but here I go.

    A blockchain is a single ledger or registry of transactions, copied multiple times and distributed widely across the network. It’s effectively a decentralised database with no single organisation, state or person in control, no middlemen. Consensus on the contents of the database is reached by continual comparison between these database “nodes”; it’s a form of distributed co-operation. The distributed database contains authenticated records of the history of activity on a network.

    The blockchain enables decentralised, programmatic authentication of a database transaction, requiring no intermediary.

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    Deja Vu Brexit, Trump ...Le Pen!

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    Chinese Commodities Crash Limit-Down As Wealth Management Product Issuance Collapses

    Chinese Commodities Crash Limit-Down As Wealth Management Product Issuance Collapses

    It seems Kyle Bass' warning was extremely timely. The deleveraging of China's $4 trillion shadow banking system just accelerated massively as Bank Wealth Product Issuance crashes 15% month-over-month. With stocks and bonds already plunging, commodities joined the ugliness tonight with Dalian Iron Ore limit down (8%) at the open (not helped by tumbling auto demand).

    As Bloomberg reports, China April Bank Wealth Product Issuance Falls 15% M/m

    Number of wealth management products issued by banks fell to 10,038 from 11,823 in March, 21st Century Business Herald reports, citing citing Wind Info data. The decline came after regulator tightens regulation on macro-prudential assessment and interbank business. Among top ten banks by wealth product sales, nine sold less than previous month (with the Agricultural Bank coillapsing 48%) only Minsheng Bank issued more.

    And it's weighing on the economy al;ready as China PMIs are all plunging (with Caixin Services tonight) - Activity in China’s services sector grew at its weakest rate in 11 months, a survey sponsored by Caixin showed on Thursday, in a further sign the world’s second-largest economy is losing some steam. The Caixin China General Services Business Activity Index fell for the fourth straight month to 51.5 in April, down from 52.2 in March and the lowest since May 2016’s 51.2, according to the poll compiled by international information and data analytics provider IHS Markit.

    As Bass concluded so ominously:

    "What you see when the liquidity dries up is people start going down... and this is the beginning of the Chinese credit crisis."
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    Key figures from rival Libyan camps meet in Abu Dhabi: official

    Libyan commander Khalifa Haftar met the head of the country's U.N.-backed government Fayez Seraj in the United Arab Emirates on Tuesday, reversing his previous refusal to engage with the Tripoli government despite months of diplomatic pressure.

    Regional and Western powers have been pushing the two to discuss resetting a U.N.-mediated agreement that led to the creation of Seraj's Government of National Accord (GNA). The deal was an attempt to end Libya's turmoil since the uprising that toppled Muammar Gaddafi in 2011.

    Hamad Bindaq, a member of Libya's eastern parliament traveling with Haftar, said Haftar and Seraj were due to hold talks in Abu Dhabi after being pictured on social media together for the first time since early 2016.

    Haftar is the dominant figure for factions in eastern Libya that have rejected the GNA, contributing to its failure to expand its power in Tripoli and beyond. Key rival armed factions in the west of the country have backed the GNA.
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    Bitcoin, Ethereum Hit New All Time Highs Amid Buying Frenzy, Liquidity Squeeze

    The price of Bitcoin accelerated its recent exponential trend higher, soaring to daily all-time highs over the past few days, rising above $1,300 on Friday, then pushing $1,400 on Monday, and even above $1,500 on the second-largest BTC exchange, and was last trading just above $1,460 on Coinbase amid a buying frenzy attributed to speculative investment across the cryptocurrency sector, coupled with liquidity problem at some exchanges which were having problems processing fiat-based transactions.
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    China's manufacturing activity expands for 9th straight month

    China's manufacturing sector continued to expand in April, though at a slower pace, said the National Bureau of Statistics (NBS) on April 30.

    The country's manufacturing purchasing managers' index (PMI) came in at 51.2 in April, lower than the 51.8 recorded in March, according to NBS data.

    The reading fell short of market expectations but still stayed above the boom-bust line of 50 for the ninth straight month.

    The slower expansion was in part due to sluggish growth in both market demand and supply, said NBS senior statistician Zhao Qinghe.

    The sub-index for production stood at 53.8 in April while the sub-index for new orders came in at 52.3, both down from the level a month ago.

    "While both the production and the new orders indices are still in the expansion territory, the gap between them has widened, which needs to be closely watched," Zhao said.

    The lower-than-expected expansion was also a result of contraction in the high energy-consuming industries, lower price at factory gate, and slower expansion in both imports and exports, Zhao said.

    On a positive note, equipment manufacturing and high-tech manufacturing continued robust growth, with the sub-indices coming in at 52.1 and 53.4 respectively, well above the 51.2 registered for all manufacturing industries.

    Consumer goods manufacturing also rose to 52.2, indicating an increasingly important role it plays in the economy, Zhao said.
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    Trump says open to raising gasoline tax to fund infrastructure: Bloomberg

    President Donald Trump said on Monday he would consider raising the federal tax on gasoline to fund infrastructure development, Bloomberg News reported.

    "It's something that I would certainly consider," Trump told the news agency in an interview on Monday. "The truckers have said that they want me to do something as long as that money is earmarked to highways."

    The Trump administration released an outline of a tax plan last week that would slash tax rates for businesses and reduce the number of tax brackets for individuals.

    The plan, however, was silent on gasoline taxes, a potentially delicate issue given the widespread impact any increase would have on U.S. households.

    Trump told Bloomberg his tax proposal was just an opening gambit in a negotiation with lawmakers on Capitol Hill.

    "Everything is a starting point," he said, according to Bloomberg, adding that he was willing to give up on aspects of his plan. He declined to specify where he would yield.
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    Blockchain: Why it is the second coming of the internet.

    Blockchain networks tend to support principles, like open access and permissionless use, that should be familiar to proponents of the early internet. To protect this vision from political pressure and regulatory interference, blockchain networks rely on a decentralized infrastructure that can’t be controlled by any one person or group. Unlike political regulation, blockchain governance is not emergent from the community. Rather, it is ex ante, encoded in the protocols and processes as an integral part of the original network architecture. To be a part of a community supporting a blockchain is to accept the rules of the network as they were originally established.

    In a blockchain transaction, you don’t have to trust your counterpart to perform their obligations or properly record transactional data, since these processes are standardized and automated, but you do have to trust that the code and the network will function as you expect. And just how immutable are blockchain ledger entries if the network becomes politicized? As it turns out, not very.

    How Blockchain Works


    Consider the case of The DAO. Short for decentralized autonomous organization, a DAO is software designed to manage the fiduciary obligations of holding and disbursing blockchain assets without any human involvement. The code that was developed for the (confusingly named) The DAO application was called a “smart contract,” and ran as a DAO application on top of the Ethereum blockchain. The DAO issued tokens through its smart contract and traded them for Ethereum’s blockchain tokens, which are called ether. This token sale was done through a widely marketed crowdfunding campaign, raising more than $150 million in ether value.

    The original vision of the Ethereum creators was that computer code should, quite literally, be treated as law in their community and serve as replacement for legal agreements and regulation. The DAO creators embraced this vision and noted that participants should look exclusively to the application’s code as dispositive on all matters. The code was the contract and the law for The DAO. Unfortunately, The DAO’s smart contract was flawed: It allowed a DAO token holder who exploited a bug in the code to siphon off one-third of the value held in the application (roughly $50 million) to their own account. This withdrawal of funds, while unexpected, did not violate either Ethereum’s or The DAO’s rules, naïve as they may have been. Nor does it appear to have violated any laws.

    But, at the end of the day, too many Ethereum community members, including some of its most prominent leaders, suffered losses, having traded their ether for DAO tokens. They felt that action had to be taken to reverse their losses. The Ethereum leadership was able to coordinate with the network stakeholders to create a so-called “hard fork,” a permanent split of the Ethereum blockchain, so that control of the siphoned-off funds would be shifted to a group of trusted leaders.

    This hard fork created a new Ethereum blockchain and was labeled a bailout by critics. The new Ethereum blockchain selectively rolled back losses only for those Ethereum blockchain token holders who had unwisely exchanged those tokens for The DAO application tokens. If you happened to lose your ether tokens in any other way, whether through market manipulation or through another hack, the rigid “code as law” doctrine still applied — and you were out of luck.

    For some members of the community, the decision to hard fork was a wanton violation of the community’s core principles, akin to burning down the house to roast the pig. In protest, they decided to keep running the original Ethereum blockchain unadulterated, and thus there are now two Ethereum networks. Somewhat confusingly, the old Ethereum network has been rebranded as “Ethereum Classic”; the new network retained the original name, Ethereum.

    Blockchain fabulists may claim that smart contract applications like The DAO’s will displace lawyers and disrupt the legal industry. But as this incident amply demonstrated, the reality is that smart contracts have proven to be neither smart nor, for that matter, enforceable agreements. The blockchain is truly an innovative approach to governance for networks and machines. But we must resist the temptation to anthropomorphize code and misapply machine governance to social systems. Code is law for machines, law is code for people. When we mix up these concepts, we wind up with situations like The DAO.

    Consider some of the controversy surrounding bitcoin. First, understand that on the bitcoin blockchain, power is meant to be distributed among all the stakeholders in the community. None of these stakeholders should have any greater influence or power than any other to change the terms of the bitcoin protocol. They are interdependent and incentivized to cooperate in conserving the extant network rules. Any change to the network rules requires coordination and consensus among all of the stakeholders. So when bitcoin software developers began debating about how to increase network capacity, the discussion devolved into a multistakeholder melee that was dubbed a “governance crisis” by the popular media. Some of the developers wanted to incorporate changes to the bitcoin codebase that would not be backward compatible, and thus would split the network into multiple blockchains — a hard fork.

    The majority of bitcoin developers have opposed hard fork scaling proposals in favor of a more conservative approach that assures the continuity of a single bitcoin blockchain. Other stakeholders have begun to view this process as obstructionist, and populist campaigns have sprung up to route around it. But despite much sturm und drang, these efforts to alter bitcoin’s power structure and circumvent bitcoin developer consensus have thus far failed. For many in the community, bitcoin’s ability to resist such populist campaigns demonstrates the success of the blockchain’s governance structure and shows that the “governance crisis” is a false narrative.

    As a blockchain community grows, it becomes increasingly more difficult for stakeholders to reach a consensus on changing network rules. This is by design, and reinforces the original principles of the blockchain’s creators. To change the rules is to split the network, creating a new blockchain and a new community. Blockchain networks resist political governance because they are governed by everyone who participants in them, and by no one in particular.

    The power of blockchain technology is that it can algorithmically enforce private agreements and community principles at a global scale by shifting the cost of trust and coordination to the network. This is what allows blockchains to create new markets where they couldn’t exist before, whether for political or for economic reasons. To do this, we have to be able to trust the blockchain, and to trust that no one controls it.

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    Oil and Gas

    Apache posts profit, improved Alpine High well results

    Houston oil and gas producer Apache Corp. returned to profitability last quarter and, perhaps more importantly, delivered first gas to market and improved oil production results at its new West Texas discovery, Alpine High.

    First quarter revenues jumped by almost $800 million or three-quarters to $1.9 billion over the same period last year, Apache reported on Thursday. Expenses fell by $125 million or 9 percent to $1.3 billion. And income leaped to $200 million in the quarter, a jump of almost $600 million after a $400 million loss in the first quarter of 2016.

    At the same time, the company reported new results for its much-discussed West Texas discovery, Alpine High. It finished construction of the first section of a 30-inch gas pipeline, allowing the company to send gas to market for the first time in the field. The trunk line allows Apache to begin bringing on new wells and producing oil and natural gas liquids in earnest.

    Apache also reported new test well results, including some of the field’s best oil production rates so far, an important marker after earlier results disappointed analysts.

    The Chinook 101AH, with a horizontal well length of just 4,500 feet, is producing more than 600 barrels of oil per day, the company reported, about three times better than previously released rates in the Woodford formation at Alpine High, and the highest flow to date there.

    And the Blackhawk 5H, with another 4,500-foot lateral, is producing more than 700 barrels of oil per day, 200 better than the company’s next best result in the Barnett formation.

    “At Alpine High, testing and delineation have continued with strong results that reinforce our confidence in this world-class resource play,” said chief executive John Christmann.

    “We are maintaining a razor-sharp focus on costs and well optimisation and actively managing our portfolio,” he added.
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    Malaysia's clogged oil shipping lanes underscore failure to reduce glut

    Oil industry leaders meeting in Malaysia next week to discuss extending production cuts won't have to look far for evidence the market remains awash in supply.

    Just off the coast, in the Straits of Malacca, dozens of tankers loaded with record amounts of unsold fuel show an OPEC-led agreement to cut production in the first half of 2017 has yet to tighten the market.

    While not on the official agenda at the bi-annual Asia Oil and Gas Conference in Kuala Lumpur from Sunday to Tuesday, the attendance of top oil executives and policy makers including Saudi Arabian energy minister Khalid Al-Falih, ensures the production cut will be a major talking point.

    Crude prices languishing near 2017 lows are also keeping the over-supply issue to the fore.

    At the center of discussions will be whether to extend the almost 1.8 million barrels per day (bpd) reduction of crude output the Organization of the Petroleum Exporting Countries (OPEC) and others including Russia agreed to in November last year.

    "Many heads are losing a lot of hair as they keep scratching their head as they see data doesn't square up," said Jorge Montepeque, senior vice president for fuel origination at Italian energy major ENI.

    "On the one hand, you have a lot of pronouncements about cutbacks in production... On the other, you have inventories that continue to build up."

    Shipping data in Thomson Reuters Eikon shows that some 35 loaded supertankers able to hold around 65 million barrels of oil are currently sitting in Malaysian waters. That's almost 10 more than in mid-April and around half a dozen more than in mid-March.

    In a note this week headlined "Where are the OPEC cuts?", Morgan Stanley said shipping and import data were yet to show a slowdown in oil supplies. OPEC oil arriving in ports around the world had, in fact, risen by around 700,000 bpd since the fourth quarter of 2016, according to the bank.

    But it's not just OPEC oil floating in Malaysian waters.

    Trade data shows fuel has also come in from the United States, Venezuela, Brazil, as well as from Europe.


    Virtually all of the Middle East's and Europe's oil to Asia passes through Malaysia, and its waters are one of the world's most important storage locations.

    What's more, state-owned oil company Petronas is Southeast Asia's biggest single oil producer, sending crude and refined products across the region via a vast pipeline and tanker network.

    When the system isn't clogged, oil simply goes through or out of Malaysia to Asia's big consumers in China, Japan or South Korea.

    But when output exceeds sales, traders store crude from the Middle East, the Americas, and Europe in tankers in Malaysia.

    "Producers are pumping oil faster than it can be sold," said one senior trader involved in bringing European crude to Asia.

    "Many either don't have storage facilities at home, or it is full, so they send it here (to Malaysia), close to the big Asian markets in the hope that they can deliver at a better price later."

    Most of the oil is positioned to meet a potential surge in China's demand as independent refiners are expected to receive a second batch of crude import quotas in June, traders said.

    Still, the bloated market is weighing on prices for Brent crude, the international benchmark for oil prices. At around $50.60 per barrel, prices are now at the same level than they were before the cuts were announced late last year. <0#LCO:>.

    Eikon data shows that crude oil shipments into Malaysia hit a high this year, averaging 700,000 bpd since January, compared with a daily average of 300,000 bpd between 2015 and 2016.

    Add to this Malaysia's own exports, though less than a third of its 650,000 bpd production, and never has more oil been sloshing around in this region.

    Many market participants believe the ongoing oversupply will force OPEC and the other producers that have agreed to cut output to extend the deal beyond June to cover all of 2017.

    A decision is expected during or after OPEC's next official meeting at its headquarters in Vienna, Austria, on May 25.

    Traders and analysts say the cartel needs to understand and address what is behind the ongoing glut.

    "OPEC members need to sit down and analyze whether... something is wrong in terms of (global) production," ENI's Montepeque said.

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    Repsol gets lift from cost cutting, higher commodity prices and increased production

    Spanish oil company Repsol more than doubled its net income in the first quarter of 2017 with upstream and downstream improvements as well as a new mega-find in the US.

    Net income of 689 million euros in the quarter was a 59% improvement on the 434 million euros obtained in the same period last year. 

    The strength of the business was also reflected in the company’s earnings before interest, tax, depreciation and amortization , which reached 1.844 billion euros, 80% greater than in the same period the previous year.

    Repsol said the increase in net income was due to improvements to the “resilience and flexibility” of the company’s activity in the continuing low price environment.

    During the quarter, Brent crude prices averaged 53.7 dollars per barrel.

    Average hydrocarbon production between January and March was 693,400 barrels of oil equivalent per day, an increase over the production average reached at the end of 2016 due to contributions from Brazil, Libya and the United Kingdom.

    Upstream increased its income by 207 million euros over the same period of the previous year, to 224 million euros.

    The Downstream area obtained an income of 500 million euros and was described as a “major cash generator” for the company.

    The refining margin indicator in Spain was 7.1 dollars per barrel, consolidating the excellent performance in this area during the last two years.

    Repsol increased its average production mainly due to activity in the United Kingdom, resumed activity in Libya and the startup of the Lapa reservoir in Brazil.

    The Brazil project, which came onstream in December 2016, contributed to the company’s new record for production in that country, set in March of this year.

    In terms of exploration activity, in March, Repsol announced the largest conventional hydrocarbon discovery on U.S. soil in the last 30 years, in the North Slope borough of Alaska.

    It is estimated that the contingent resources of the area where the discovery was made, known as Nanushuk, will total approximately 1.2 billion recoverable barrels of light crude oil.

    Repsol Sinopec Resources UK Limited is a joint venture between Repsol and Addax Petroleum UK Limited, a wholly-owned subsidiary of China Petrochemical Corporation (Sinopec Group).

    It arose from the acquisition, in 2015, by Repsol, of the global assets of the former Talisman Energy Inc, including its 51% equity interest in the joint venture, previously called Talisman Sinopec Energy UK.
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    Patterson-UTI Huge Increase in Monthly Rig Count

    As we do every month (and have for two years), MDN tracks how many rigs oilfield services company Patterson-UTI Energy reports operating–as a proxy for rig count health in the Marcellus/Utica.

    Patterson operates a number of rigs in the northeast, as well as other areas of the continental United States (and Canada).

    Patterson was our “canary down the mine shaft” for discerning when the deep, dark recession in drilling would turn around. It happened in June 2016–and every single month since that time, including the month of April.

    In March, Patterson’s rig count jumped up by 10, to an average of 88 active rigs operating in the U.S. That has been the biggest single monthly increase since they began adding rigs again last June–until April. Last month the Patterson rig count rocketed to 115, up an amazing 27 rigs in a single month.
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    Cheniere posts $54 million profit in Q1

    US LNG export player Cheniere reported a net income of $54 million in the first quarter as it continued to boost production at its Sabine Pass LNG export terminal.

    This compares to a net loss of $321 million in the first quarter of 2016.

    Total revenues increased $1,142 million during the three months ended March 31, 2017, hitting $1.2 million compared to $69 million in the first quarter 2016, generally as a result of the commencement of operations at the Sabine Pass LNG project.

    Cheniere’s Sabine Pass LNG project loaded 43 LNG cargoes during the first quarter, seven of which were commissioning cargoes. This is an equivalent of 154 trillion British thermal units (TBtu).

    Jack Fusco, Cheniere’s president and CEO said, “train 3 of the SPL project achieved substantial completion during the quarter, and we commenced commissioning activities on Train 4. We have now safely and efficiently placed three trains into commercial operation in less than a year, and we expect to have Train 4 complete during the second half of 2017.”

    He added that the company is looking to place the fourth liquefaction train at the Sabine Pass LNG plant by the end of 2017.

    Cheniere’s LNG revenues in the first quarter of 2017 hit $1.14 billion, the company’s report shows.

    As of April 2017, LNG from the SPL Project had reached 20 of the 39 LNG importing countries around the world.
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    Canadian Natural Resources Limited Announces 2017 First Quarter Results

    Canadian Natural Resources Limited Announces 2017 First Quarter Results

    Commenting on the first quarter 2017 results, Steve Laut, President of Canadian Natural stated, “The strength of our well balanced and diverse portfolio, combined with Canadian Natural’s ability to effectively and efficiently execute, delivered a strong first quarter for the Company. Funds flow from operations were strong in the quarter, exceeding capital expenditures by approximately $800 million, and as a direct result, contributed to over $500 million of debt reduction in the quarter, strengthening our balance sheet quickly.

    Execution continues at Horizon with strong production following the ramp up of Phase 2B. Expansion volumes drove 9% growth in our crude oil production volumes and 4% growth on an overall BOE basis when compared with the first quarter of 2016, impressive results given natural gas volumes were once again impacted by third party facility reliability issues. Furthermore at Horizon, record low operating costs of just over $22.00/bbl of SCO were achieved, another strong result. The Phase 3 expansion continues to be on schedule and costs are on track. Phase 3 is targeted to add an additional 80,000 bbl/d of SCO in only six months, the next step in our transition to a long-life, low decline asset base.”

    Canadian Natural’s Chief Financial Officer, Corey Bieber, continued, “Our financial performance was strong during the first quarter. The Company achieved net earnings of $245 million as production increased by 2% from the fourth quarter of 2016, with benchmark crude oil prices stabilizing in the US$50 region in the quarter. Funds flow from operations for the Company in the quarter was also robust at $1.64 billion. This translates to free cash flow after capital expenditures and dividends requirements of roughly $515 million, further translating to a reduction in absolute debt levels of $500 million. Commensurate with this debt reduction, available liquidity to the Company increased by approximately $500 million to $3.5 billion from the $3.0 billion available at the end of 2016.”

    – Canadian Natural generated funds flow from operations of $1,639 million in Q1/17, an increase of almost $1.0 billion from $657 million in Q1/16 and comparable with $1,677 million in Q4/16. The increase from Q1/16 primarily reflects higher synthetic crude oil (“SCO”) sales volumes and realized prices from the Company’s North America Oil Sands Mining and Upgrading (“Horizon”), higher North America E&P crude oil and NGL netbacks and higher natural gas netbacks.

    — The Company generated significant free cash flow of approximately $800 million in Q1/17 after net capital expenditures. After capital expenditures and quarterly dividend requirements, approximately $515 million of free cash flow was realized in the quarter, which was largely used to reduce the Company’s debt levels.

    – For Q1/17, the Company had net earnings of $245 million compared to net earnings of $566 million in Q4/16 and a net loss of $105 million in Q1/16. The adjusted net earnings from operations was $277 million in Q1/17 compared to adjusted net earnings of $439 million in Q4/16 and an adjusted net loss of $543 million in Q1/16.

    – Canadian Natural’s corporate crude oil and NGLs production volumes averaged 598,113 bbl/d representing a 9% increase from Q1/16 levels. Crude oil and NGL production volume increases were primarily due to the successful ramp up of the Horizon Phase 2B expansion.

    – The Company’s corporate production volumes averaged 876,907 BOE/d in Q1/17, representing a 4% increase from Q1/16 levels, despite 3rd party natural gas facility outages experienced in the quarter.

    – At Horizon, Canadian Natural’s world class oil sands mining and upgrading operations, record quarterly production volumes were achieved for the second consecutive quarter. In Q1/17 production reached 192,491 bbl/d of SCO, within the Company’s previously issued guidance, representing increases of 8% and 50% over Q4/16 and Q1/16 levels respectively.
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    Occidental Petroleum Announces 1st Quarter 2017 Results

    Net Income of $117 million or $0.15 per share
    Permian Resources average daily production of 129,000 BOE, up 5 percent from the previous quarter
    Chemical segment’s Ingleside ethylene cracker started in February, on schedule and on budget

    Occidental Petroleum Corporation (NYSE:OXY) today announced reported net income of $117 million, or $0.15 per diluted share, compared with a reported loss of $272 million, or $0.36 per diluted share, for the fourth quarter of 2016. Lower costs, improved crude oil prices and the increase in caustic soda prices and sales volumes during the first quarter resulted in increases to income and cash flow on a sequential basis.

    “Our focus remains on areas that generate the best returns and we are seeing improvements in margins across all of our businesses,” said President and Chief Executive Officer Vicki Hollub. “Permian Resources continues to be a growth engine for our company, with a 5 percent improvement in production this quarter, reflecting increased drilling activity and well productivity in the Delaware Basin.”


    Oil and Gas

    Total average daily production volumes were 584,000 barrels of oil equivalent (BOE) for the first quarter of 2017. Permian Resources average daily production volumes came within guidance and improved by 6,000 BOE from the prior quarter to 129,000 BOE in the first quarter of 2017 due to increased drilling activity and well productivity in the Delaware Basin. In April 2017, Occidental completed the sale of its South Texas gas properties. First quarter of 2017 average daily production volumes, adjusted to exclude South Texas, were 559,000 BOE, including domestic production volumes from ongoing operations of 278,000 BOE.

    Internationally, average daily production volumes were 281,000 BOE for the first quarter of 2017. Production volumes for the first quarter of 2017 reflected Colombia pipeline disruptions, as well as planned maintenance at the Al Hosn Gas and Dolphin operations. All of these assets are currently operating at full capacity.

    Oil and gas pre-tax income for the first quarter of 2017 was $220 million, compared to $17 million for the fourth quarter of 2016. The increase in oil and gas results reflected higher oil prices and lower DD&A rates in the first quarter of 2017, partially offset by lower international sales volumes.

    For the first quarter of 2017, average WTI and Brent marker prices were $51.91 per barrel and $54.66 per barrel, respectively. Average worldwide realized crude oil prices were $49.04 per barrel for the first quarter of 2017, an increase of 9 percent compared with the fourth quarter of 2016. Average worldwide realized NGL prices were $21.59 per barrel in the first quarter of 2017, an increase of 18 percent compared to the fourth quarter of 2016. Average domestic realized natural gas prices were $2.68 per MCF in the first quarter of 2017, compared to $2.39 per MCF in the fourth quarter of 2016.


    In February, OxyChem and its joint venture partner, Mexichem, began operations of an ethylene cracker in Ingleside, Texas. The project was completed on schedule and on budget. The cracker, which is operated by OxyChem, has the capacity to produce 1.2 billion pounds of ethylene per year and provide OxyChem with an ongoing source of ethylene for manufacturing vinyl chloride monomer, which Mexichem will use to produce polyvinyl chloride (PVC) resin and PVC piping systems. The companies have a 20-year supply agreement.

    Chemical pre-tax income for the first quarter of 2017 was $170 million. Pricing for caustic soda continued to increase as global demand remained robust and supply was limited due to industry-wide planned and unplanned outages. In addition to the impact of higher caustic soda prices, chlor-alkali margins improved more than anticipated due to lower natural gas costs compared to original forecasts. Compared to pre-tax income of $152 million in the fourth quarter of 2016, the increase resulted from higher realized caustic soda prices and volumes. Production and sales volumes increased seasonally from the fourth quarter of 2016.
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    Iraq loading first crude oil cargo for Egypt under new deal

    Iraq's oil ministry said on Thursday it had started loading a tanker with 2 million barrels of crude oil bound for Egypt, marking the first shipment under a bilateral agreement.

    Under a one-year agreement reached last month between Iraq and Egypt, Iraq will sell 12 million barrels of oil to Egypt, the ministry said.
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    Penn West reports profit on higher oil prices, asset sales gains

    Canadian oil and gas producer Penn West Petroleum Ltd reported a quarterly profit, compared to a year-ago loss, helped by an uptick in crude prices and gains from asset sales.

    The company said average sales price of heavy oil more than doubled in the first quarter, while light oil and natural gas liquids prices rose 65.3 percent.

    Operating costs rose 11.2 percent to C$14.48 per barrel of oil equivalent (boe) in the three months ended March 31, partly due to the timing and costs related to assets sold or held for sale.

    Quarterly total production fell 54.7 percent to 34,900 barrels of oil equivalent per day (boepd), primarily due to asset sales.

    The company — which in 2013 was a 133,000 boepd producer — operates primarily in the Cardium, Viking and Peace River areas of Alberta after shrinking its portfolio dramatically to help survive the downturn.

    The company reported a net profit of C$27 million ($19.69 million), or 5 Canadian cents per share, in the first quarter ended March 31, compared with a loss of C$100 million, or 20 Canadian cents per share, a year earlier.

    The Calgary-based company said gross revenue fell to C$132 million from C$231 million.

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    Chesapeake profit beats on higher crude prices

    U.S. natural gas producer Chesapeake Energy Corp reported a better-than-expected quarterly profit and raised its 2017 production estimate, helped by an uptick in crude prices after a more than two-year slump.

    Chesapeake shares were up 3.8 percent at $5.75 in premarket trading on Thursday.

    The company raised the lower end of its full-year production forecast to 197.5 million barrels of oil equivalent (boe), from 194 million boe. It maintained the upper end of the range at 205 million boe.

    Chesapeake said average realized oil price rose 37 percent to $51.72 in the first quarter ended March 31, while natural gas prices rose about 32 percent.

    However, the company's total production fell 21.3 percent to 48 million barrels of oil equivalent in the quarter.

    Chesapeake reported a net profit available to shareholders of $75 million, or 8 cents per share, in the quarter, compared with a loss of $1.11 billion, or $1.66 per share, a year earlier.

    The year-ago quarter included an impairment charge of nearly $1 billion as the company wrote down the value of some oil and gas assets.

    Excluding items, the company earned 23 cents per share, above analysts' average estimate of 18 cents per share, according to Thomson Reuters I/B/E/S.

    Total revenue rose 41 percent to $2.75 billion in the quarter, well above estimates of $2.30 billion.
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    Analyst: Permian, GoM Are Equally Important Producers

    Despite the perception of weakness in the offshore segment, the U.S. Gulf of Mexico (GoM) matches the Permian Basin in importance for U.S. oil and gas production, according to Rystad Energy.

    That assessment comes even though GoM production is expected to fall while Permian production continues its strong growth, said Artem Abramov, the consultancy’s vice president for analysis.

    “The evolution of deepwater startup activity in second-half 2016 positions GoM for the prolonged growth in 2017,” Abramov wrote.

    Both the GoM and Permian experienced improved drilling efficiency in 2015-2016, the report said. To build on that, the U.S. Energy Information Administration said in its latest Drilling Productivity Report that May production in the Permian, spanning Texas and New Mexico, could reach 2.36 million barrels per day (MMbbl/d), an increase of nearly 76 Mbbl/d.

    The GoM produced 1.73 MMbbl/d of oil in December 2016, 20 Mbbl/d below its all-time high output of 1.752 MMbbl/d in September of 2009, the Rystad report said.

    GoM oil production in January 2017 almost reached 1.748 Mbbl/d, Abramov said, adding that production increased by 19 Mbbl/d from December 2016.

    The GoM in its entirety, not just the portion used for U.S. offshore drilling, has a total area of about 600,000 sq miles, and links the ports of Florida, Alabama, Mississippi, Louisiana and Texas with six Mexican states, according to the Gulf of Mexico Foundation.

    The Permian Basin is about 250 miles long by 300 miles wide and, according to DrillingInfo, most of the increased hydrocarbon production in recent years has come from the multi-stacked Sprayberry, Wolfcamp and Bone Spring areas in the Permian’s Delaware and Midland sub-basins. Abramov said the driving force behind these multi-stacked areas was the overall expansion of unconventional activity.

    The API gravity of crude in the two areas does not vary greatly—or at least not now—“as a lot of recent deepwater developments produce fairly light crude as well,” Abramov said.  This was not the case historically, he added, noting U.S. refineries were designed for heavier crudes. Now, GoM producers can more easily find domestic refinery contracts along the Gulf Coast, he said.

    How much crude could be produced in both areas?

    The Permian could add between 450 Mbbl/d and 500 Mbbl/d in 2017, and about that amount in 2018, Abramov said. In 2018, one large, 450-Mbbl/d pipeline in the Permian will be turned in-line. Between 300 Mbbl/d and 450 Mbbl/d of capacity can be added through existing pipelines, he said.

    Abramov cautioned, however, that any more growth in the Permian will come with “severe bottlenecks and cost escalation.”

    Setbacks are something already experienced with production in the GoM.

    Production outages are likely for the GoM Abramov said, noting the February fire on Phillips 66’s Paradis Pipeline. “Typically, we observe [one to two] unplanned outages each year, which have some material impact on the total GoM supply. Most frequently, unplanned outages are associated with the hurricane season [in the third quarter].”

    The 2017 Atlantic hurricane season begins June 1.

    Abramov predicted a minor decline for February’s final GoM production, saying “next week we should get final production [information] for February.” He noted that in March, though, production likely passed September 2009’s 1.752 MMbbl/d.
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    Colombian president announces largest gas find in decades

    Colombian President Juan Manuel Santos and state-controlled oil company Ecopetrol Wednesday announced the country's largest natural gas discovery in 28 years, but stopped short of quantifying the Caribbean deepwater find or declaring it to be a commercially viable.

    The discovery comes as Colombia is experiencing an ongoing decline in domestic gas reserves and output. Earlier this year, the country lost its self sufficiency in gas production and was forced for the first time to import an LNG cargo from Trinidad and Tobago to a new regasification facility in Cartagena in order to meet domestic gas demand.

    At a press conference in Bogota, Santos said the deepwater well Gorgon-1, drilled by Ecopeterol and its 50-50 operator partner Anadarko, had found natural gas at a depth of 2,316 meters. The gas-bearing sand layer was measured at between 260 and 360 feet of natural gas pay.

    "This discovery demonstrates the confidence of foreign investors in Colombia," Santos said. Mining and Energy Minister German Arce said the find was the country's largest since BP's Cusiana gas field in 1989.

    In a release shortly before the president spoke, Ecopetrol said the well represents a continuation of the "geological train" of gas discovered previously in the adjacent Kronos deep water block in 2015 and Purple Angel deep water block in March of this year off Colombia's Caribbean coast. Both blocks are also owned by Ecopetrol and Anadarko.

    Ecopetrol said Anadarko provided the information that the find is of record size for Colombia, but no specific or potential reserve size was mentioned. Earlier this year, Ecopetrol announced it would drill at least two appraisal wells in 2017 to assay the commercial possibilities of the Kronos discovery.

    The Ecopetrol release was somewhat more reserved than the president, saying the Gorgon-1 discovery paired with Kronos and Purple Angel "demonstrate for Ecopetrol the possible extension of a gas field in this zone of the Colombian Caribbean."

    On the condition of anonymity, a source at Ecopetrol said that there is no target date for determining the fields' commercial viability. Bringing the gas onshore would require an investment of billions of dollars and take the better part of a decade, Ecopetrol officials have said.

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    Statoil Q1 results significantly better than expected

    Norway's Statoil ASA posted a forecast-beating first-quarter net profit Thursday, driven by higher oil prices and increased production while making good progress on its cost-efficiency drive.

    Production from the Norwegian continental shelf was at its highest level in five years, and its international portfolio delivered positive results and cash flow per barrel after tax on par with its Norwegian portfolio, it said.

    The 67% state-owned company confirmed it would deliver a further $1 billion in annual cost savings this year, backing a target it outlined in February and bringing savings this year to $4.2 billion.

    Capital expenditure in 2017 is expected to remain at the 2016 level of around $11 billion, while exploration expenses are still seen at around $1.5 billion, excluding signature bonuses.

    Statoil still expects 4%-5% production growth in 2017 and organic annual production growth of around 3% from 2016 to 2020.

    Net profit for the three months through Mar. 31 was $1.06 billion, compared with $611 million a year earlier. Analysts had expected a net profit of $739 million. Revenue rose 53% on the year to $15.47 billion, against expectations of $14.61 billion.

    The company maintained its quarterly dividend at $0.2201 a share.

    Statoil's adjusted earnings before interest and taxes, which excludes one-off items to show the company's underlying performance, rose to $3.31 billion, against analysts' expectations of $2.64 billion. Higher prices for oil and North American gas, solid operational performance with high production and continued progress on improvement initiatives contributed to the increase, it said.
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    Shell’s 1Q profit soars

    Royal Dutch Shell has reported a sharp rise in its first quarter profit, boosted by chemicals and upstream segment of its business.

    Current Cost of Supplies (CCS) Income excluding identified items was $3,86 billion, up from $1,6 billion a year ago.

    The $2.2 billion increase from the first quarter of 2016 was mainly driven by higher contributions from Upstream and Chemicals, partly offset by higher net interest expense, Shell said.

    Royal Dutch Shell Chief Executive Officer Ben van Beurden said: “The first quarter 2017 was a strong quarter for Shell. Cash flow from operating activities of $9.5 billion and free cash flow of $5.2 billion enabled us to reduce debt, and cover our cash dividend for the third consecutive quarter. We saw notable improvements in Upstream and Chemicals, which benefited from improved operational performance and better market conditions. Our operations in Qatar are restarting during the second quarter.

    “We continue to reshape Shell’s portfolio and to transform the company with over $20 billion divestments completed or announced that will strengthen the balance sheet as they are completed.”

    “The strategy we have outlined to deliver a world-class investment case is taking shape. Following the successful integration of BG, we are rapidly transforming Shell through the consistent and disciplined execution of our strategy. This includes investing around $25 billion this year and the delivery of new projects, which we expect to generate $10 billion in cash flow from operating activities by 2018.”


    On the Upstream side, During the quarter, Shell made a final investment decision (“FID”) for the Kaikias deep-water project in the Gulf of Mexico.  Shell announced the sale of a package of United Kingdom North Sea assets, oil sands and in-situ interests in Canada, and onshore interests in Gabon.

    Upstream earnings excluding identified items were $540 million, compared to a loss of $1.4 billion a year ago.

    Compared with the first quarter 2016, Upstream earnings excluding identified items benefited from higher realised oil and gas prices, increased production volumes mainly from new assets and improved operational performance, and lower depreciation including the impact of assets held for sale.

    Compared with the same quarter a year ago, cash flow from operating activities increased as a result of higher prices and volumes. The production contribution of BG assets for an additional month, compared with the first quarter 2016, was some 211 thousand boe/d.

    New field start-ups and the continuing ramp-up of existing fields, in particular Lula Central, Lula Alto and Lapa in Brazil, Kashagan in Kazakhstan, Sabah Gas Kebabangan in Malaysia, and Stones in the Gulf of Mexico, contributed some 142 thousand boe/d to production compared with the first quarter 2016, which more than offset the impact of field declines, Shell said.

    Looking ahead, Shell said that compared with the second quarter 2016, Upstream earnings are expected to be negatively impacted by a reduction of some 45 thousand boe/d associated with completed divestments, and by some 50 thousand boe/d associated with the impact of lower production at NAM in the Netherlands. Earnings are expected to be positively impacted by some 55 thousand boe/d associated with lower levels of maintenance.
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    Anadarko, Bill Barrett Add Sand, Reduce Stage Spacing in DJ Basin

    Q1 production up despite low 2016 activity; Anadarko drills a long lateral in record 5.2 days

    Two major Niobrara players, Anadarko Petroleum (ticker: APC) and Bill Barrett Corporation (ticker: BBG) held conference calls today, reporting similar strategies for success in the basin.

    Anadarko reported sales of 242,000 BOEPD from its DJ basin properties, a slight increase from Q1 2016 despite reduced activity in 2016. The company added one rig this quarter, and now has six operated rigs and two completion crews active in the basin.

    Anadarko continues to drill quicker wells, reporting a new record for completing a long lateral well: 5.2 days. For reference, in Q4 2016 the company reported a record of 5.5 days to complete a long lateral in the basin.

    Like many unconventional operators in the U.S., Anadarko has been experimenting with more intense completion designs. Recent wells have been completed with increased fluid volumes and tighter stage spacing. The company reports that early results from these new wells show improvements of over 10% relative to older designs.

    Anadarko’s Advanced Analytics and Emerging Technology group is designing these improvements based on data from the company’s old wells. In today’s conference call, APC Senior VP of U.S. Onshore Exploration and Production Brad Holly commented “we’re really excited about what we’re seeing in the DJ because we have done over 1,000 wells out there. We’ve taken all that data along with everything we’ve seen in the industry and really ran it through our advanced analytics and looking at every component that makes up that fracture thing.

    “We’re working on increased fracture intensity, which is really we’re trying to bust up the rock as much as possible. We have shrunk our stage basin as well as increased our fleet volumes and we’re continuing to tweak that recipe. We did a few of those in the fourth quarter of 2016 and we started to do quite a few more of those in the first quarter of 2017.

    “So, we put some of our early results out in the ops report and we’re continuing to watch results, but we’re encouraged and excited about what we’re seeing from the new completion design. We continue to tweak that and we’ll have more information as we get more production results.

    “We’re certainly looking at more fluid, and I think we’re playing with some of the other parameters and what combinations to pump these things.”

    Bill Barrett design improvements give 45% ROR

    Bill Barrett Corporation has reported similar keys to success. Current completion designs involve increasing sand concentration and decreasing stage spacing. Based on the past two years of production history increasing sand concentration from 1,000 lbs/ft to 1,200 lbs/ft improves production by 36%. Similarly, decreasing stage spacing from 170 ft/stage to 120 ft/stage indicates 10% or greater cumulative production. Bill Barrett is combining these improvements this year, with a base design of 1,500 lbs/ft of sand and frac spacing of 100 ft/stage to 140 ft/stage. These design enhancements have improved well returns to about 45% at current prices.

    Bill Barrett President and CEO R. Scot Woodall mentioned that further improvements are possible, depending on the results of current wells. “We obviously are kind of watching what others are doing as well,” Woodall commented, “but I know a current pad that’s being completed right now is going to go to 100-foot stage spacing. So that’ll be testing one of the lower ends. And I think we’ll have to look at some results of the 1500 pounds and see if we need to go larger or not. There’s some operators that are doing some more. I think we can look at those results. So I think we’ll evolve throughout the year a little bit.”

    In total, Bill Barrett plans to drill 70 to 75 wells in the DJ basin this year. The company currently  has one active rig in the basin, but plans to add a second during Q2 2017. First quarter production from the DJ was up 22% year-over-year at 14,200 BOEPD.

    Quarterly results improving year-over-year

    Anadarko reported a net loss of $318 million, or ($0.58) per diluted share, vastly exceeding the company’s Q1 2016 loss of $1 billion. Bill Barrett reported a net loss of $13 million, ($0.18) per diluted share, up from the $46.5 million loss the company reported this time last year.
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    Eagle Ford, STACK Shine for Devon in Q1

    Devon targets 20 U.S. operated rigs by year-end

    Devon Energy Corp. (ticker: DVN) reported stronger than expected production results Tuesday as the company’s U.S. resources outperformed its earlier guidance. Oil production averaged 261 MBOPD, up 7% sequentially, 5 MBOPD more than the top end of the company’s guidance.

    The growth was driven entirely by Devon’s U.S. resource plays where the company is also seeing the highest margins in its portfolio, according to the DVN press release.

    Eagle Ford, STACK completions add up

    In total, U.S. oil production reached 123 MBOPD in the first quarter, a 17% increase from the previous quarter, thanks to higher completion activity across the company’s Eagle Ford and STACK operations. Including Eagle Ford partner activity, the company exited the first quarter with 15 rigs operating.

    Plowing $2+ billion into U.S. plays in 2017

    Devon’s full-year 2017 goals are to grow production 13% to 17%, which the company believes it can deliver by investing between $2.0 billion and $2.3 billion of E&P capital in 2017, with nearly 90% of the capital dedicated to U.S. resource plays.

    The company plans to steadily increase drilling activity throughout the year to as many as 20 operated rigs by the end of the year.

    Jackfish exceeding nameplate capacity by nearly 20%

    Further north of Devon’s U.S. assets, its heavy-oil operations in Canada averaged 138 MBOPD in the first quarter, a 9% increase year-over-year. The growth was driven by its Jackfish complex, where gross production increased to a record 125.1 MBOPD during Q1, according to the company. The record production is exceeding the facility’s nameplate capacity by nearly 20%, Devon said in its earnings release.

    Operating cash flow expands 54%

    Devon’s reported net earnings totaled $565 million or $1.07 per diluted share in the first quarter. Adjusting for items securities analysts typically exclude from their published estimates, the company’s core earnings totaled $217 million or $0.41 per diluted share in the first quarter, exceeding consensus expectations.

    The company’s profitability in the first quarter was attributable to strong production growth, higher commodity prices and an improved cost structure, DVN said in the press release. These factors also strengthened Devon’s operating cash flow to $834 million, a 54 percent increase from the fourth quarter of 2016.

    Devon reported $2.1 billion of cash on hand at the end of the quarter. The company paid off $2.5 billion of debt during the course of 2016, pushing any significant debt maturities out until mid-2021. DVN also reported that more than 50% of its estimated oil and gas production for this year is hedged, and that the company is currently working on accumulating additional hedges for 2018.

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    Slumping oilfield services sector bets on new offshore technology

    The oil industry's top equipment and services suppliers this week are hawking vastly cheaper ways of designing and equipping subsea wells, aiming to slash the cost of offshore projects to compete with the faster-moving shale industry.

    At the Offshore Technology Conference, the industry's annual gathering of floating rig and subsea well suppliers, sales pitches this year are all about cost savings and faster time to first production. With U.S. crude priced CLc1 under $50 a barrel, offshore projects with their typically high costs and long-lead times are now borrowing from leaner shale in the competition for oil company investment.

    Low oil prices have soured new exploration in the U.S. Gulf of Mexico, for instance, but production volumes there have remained strong due to the long lead times of these projects. Gulf of Mexico producers are expected to add 190,000 barrels per day this year to output now running about 1.76 million bpd.

    Tool and services companies are offering new technologies that can do several jobs, taking the place of multiple devices or highly-paid consultants.

    National Oilwell Varco Inc (NOV.N) is exhibiting software it touts as performing much like a drilling expert, sorting through vast amounts of data to find ways to speed production and reduce downtime.

    The new software "takes actions a person would do and runs them automatically. It's low cost and it's simple" said David Reid, National Oilwell Varco's chief marketing officer.

    Baker Hughes Inc (BHI.N) is showing a new tool called DeepFrac that it said eliminates several steps now required to complete underwater wells. That saving pares the price of a well by up to 40 percent, speeding first production and lowering the break-even cost for producers.

    "This helps sharply cut some of the risk of drilling an offshore oil well and, we believe, sharply reduces costs for our customers," said Jim Sessions, a vice president of technology at Baker Hughes.

    Graham Hill, an executive vice president at KBR Inc (KBR.N), detailed the construction company's plan for a cheaper floating production vessel, saying the new vessel fits producers' tight budgets. KBR can hope to earn more by selling extra features.

    "This is like ordering a Ford," he said. "There's a base package, and you can add extras."

    Richard Morrison, president of BP plc (BP.L)'s Gulf of Mexico region, said the industry has accepted that crude prices will probably stay low, meaning oil producers like BP must work with services providers to reduce the multibillion dollar cost of offshore projects.

    "That break even point can't come back to $80 a barrel, so I've got to figure out ways to work with my supplier over the long-term to keep that in check," he said during a presentation.

    Morrison touted BP's use of new seismic imaging technology that helped identify 1 billion additional barrels of "possible resources" at four of its U.S. Gulf of Mexico offshore fields. The technology enhances existing seismic images to find oil hidden beneath salt structures deep underground.

    Just weeks away is a coming Vienna meeting of the Organization of the Petroleum Exporting Countries where OPEC and other oil producers are to decide whether to continue production curbs past June.

    If OPEC fails to continue the curbs, oil prices could fall again, making a difficult market worse, said Charles Cherington, a co-founder of Intervale Capital, a private equity investor in oilfield services.

    Assuming OPEC continues the existing curbs, Cherington said the best the industry can hope for this year is crude "gets to the low to mid $50s (a barrel)" or half what it fetched at this time three years ago.

    Few oilfield suppliers are generating steady profits, he said, and "in the short run, we don't see the market getting much better," he added.

    Marc Gerard Rex Edwards, chief executive of rig provider Diamond Offshore Drilling (DO.N), on Monday reported its first quarter earnings declined on revenue down 25 percent from a year ago.

    "I think we're beginning to see the signs of a bottom," he told Wall Street analysts, adding: "But I'm not exactly calling a bottom in the market at this particular moment in time."

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    BP: Deep water can compete with shale 'any day'

    BP's efforts to cut costs in the deep-water Gulf of Mexico have led to higher operating margins than before the downturn making the prolific producing region now far more competitive with shale, a company official said.

    "Today our cash margins in the Gulf of Mexico are better than they were when the price of oil was $80 a barrel," said Richard Morrison, BP's regional president of the Gulf of Mexico, speaking at the Offshore Technology Conference in Houston on Monday.

    The UK supermajor is one of the biggest oil producers in the US Gulf and operates four major production hubs as well as multiple deep-water drilling units.

    Since 2014, however, BP has paused its exploration programme in the region and "refocused" its portfolio. It has "halved" its fleet of vessels and helicopters in the region and nearly halved its onshore Gulf of Mexico workforce, Morrison said.

    Meanwhile, some of BP's top competitors in the deep-water US Gulf like ConocoPhillips and Marathon Oil have directed more and more spending on US shale and tight oil, where economics are said to be better.

    With the changes BP has made to its deep-water business, Morrison said the US Gulf now "can compete with tight onshore oil any day - any day."

    Optimising the portfolio, spreading out risk through operated and non-operated stakes and improving overhead and lifting costs were all vital to improving the economics, he said.

    These days deep-water breakeven costs for BP are below $40 a barrel compared to $80 in 2014.

    "The economics for deep-water investments make as much sense today as they did back in 2001. Back then, the oil price was hovering around $20 a barrel and material discoveries were being made,” Morrison said.

    That was the same year BP’s giant Thunder Horse development project was sanctioned, tapping one of the biggest discoveries to date in the Gulf of Mexico.

    Tiebacks are leading the way as players reinvent US Gulf projects

    Subsea tiebacks to existing infrastructure have also made investment decisions easier thanks to reduced cycle times and more reliance on industry standards.

    Morrison described a “new mindset” at BP regarding tiebacks.

    "Tiebacks are no longer an interesting side business. They are integral to both the midterm and longer term plans in deep-water,” he said.

    BP's approach to development is becoming “more standardised and supplier-led", he said.

    "We were getting into a place where perfection and design-tweaking had gotten in the way of good business," he said.

    BP is now using its engineering expertise is to minimise risk "rather than designing the pristine solution".

    This has led to shorter development cycle times. For subsea tiebacks, BP expects between 10 and 20 months from sanction to first oil, versus a typical 36 to 48 months previously.

    "We have modified our approach by looking to industry to supply us their standard products and solutions rather than imposing BP standard on the supply chain," Morrison said.
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    Summary of Weekly Petroleum Data for the Week Ending April 28, 2017

    U.S. crude oil refinery inputs averaged about 17.2 million barrels per day during the week ending April 28, 2017, 108,000 barrels per day less than the previous week’s average. Refineries operated at 93.3% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged about 8.3 million barrels per day last week, down by 648,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.2 million barrels per day, 4.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 693,000 barrels per day. Distillate fuel imports averaged 112,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.9 million barrels from the previous week. At 527.8 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.2 million barrels last week, and are near the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.6 million barrels last week but are in the upper half of the average range for this time of year. Propane/propylene inventories increased slightly but remained virtually unchanged from last week and are in the lower half of the average range. Total commercial petroleum inventories increased by 1.3 million barrels last week.

    Total products supplied over the last four-week period averaged 19.6 million barrels per day, down by 2.4% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, down by 2.7% from the same period last year. Distillate fuel product supplied averaged 4.2 million barrels per day over the last four weeks, up by 3.3% from the same period last year. Jet fuel product supplied is down 0.1% compared to the same four-week period last year.

    Cushing down 700,000 bbls
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    US lower 48 oil production up 25,000 bbls day

                                              Last Week   Week Before    Last Year

    Domestic Production........... 9,293            9,265           8,825
    Alaska ....................................... 526                523              430
    Lower 48 .............................. 8,767             8,742           8,395
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    Panama Canal to see daily LNG carrier transits within 4 years, says CEO

    The number of LNG carrier transiting the Panama Canal could average one a day by 2021 as more US supply comes on stream and targets demand in North Asia, according to Panama Canal Authority CEO Jorge L. Quijano.

    "During the past nine months of operation of the Panama Canal we have seen LNG flows that we never expected a few years back," Quijano said on the sidelines of the Sea Asia Conference, held in conjunction with the Singapore Maritime Week 2017 last week.

    The initial projection was for one LNG ship a week but this had already reached three to four ships, he said.

    Much of the future traffic will be driven by emerging LNG exports from the US, of which some will pass through the canal, he said.

    Cheniere has three fully operational LNG trains at Sabine Pass on the US Gulf Coast, with a fourth train undergoing commissioning expected to reach substantial completion in second half 2017, the company said in April.

    Train five is currently under construction and slated to become operational in 2019, and train six fully permitted and being commercialized, it added.

    Cheniere also has two trains under construction at its liquefaction project near Corpus Christi in Texas, with operations at both trains expected to begin in 2019, the company said.

    Other US LNG projects slated to start production in the near future include Freeport LNG, Cameron LNG in Louisiana and Cove Point LNG.

    "The prospects are really good for LNG transits for us and as you have more LNG and more fracking, there will be more LPG as well," Quijano said.

    "We previously had LPG Panamaxes going through. We have more than tripled the amount of LPG going through the Panama Canal now that we have the bigger locks and we can handle the very large gas carriers," he said, adding: "So that has also been a surprise."

    In addition to LNG cargoes to North Asia, the Pacific side of Mexico has accounted for almost 55% of the LNG passing through the canal to date.

    LPG and LNG are providing extra revenue for the Panama Canal in addition to the container trade, Quijano said.

    "The container trade is [still] important for us because that represents 50-51% of our revenue," he said.

    Container ships ranked first in both the number of canal transits and total cargo tonnage in 2016, with the dry bulk segment second. Crude and products tankers comprised 7.4% of total cargo tonnage in the year, LPG carriers 5.6% and LNG vessels 0.3%, Platts reported in March.

    The Panama Canal Tuesday had its largest vessel both in dimension and capacity transit the Expanded Canal since it was inaugurated in June 2016.

    Attached Files
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    Nigeria pays initial $400 mil owed foreign oil partners, eyes 2.5 mil b/d output by 2019

    Nigeria has made an initial payment of $400 million, out of the $5.1 billion debt owed to its foreign oil partners, as it kickstarted a new funding mechanism for upstream ventures aimed at boosting investment in the oil and gas sector, oil minister Emmanuel Kachikwu said Wednesday.

    In December 2016, the government signed a new funding arrangement with Shell, ExxonMobil, Chevron, Total and Eni, that would see Nigeria exit the system of contributing money to fund its average 57% equity in the ventures, known locally as cash call, and allow producers to independently source funds and control their own budgets.

    "The first payment of $400 million was paid last week to the IOCs [International Oil Companies]. The $400 million payment was part of cash call debt owed the IOCs in 2016," a statement Wednesday from the oil ministry quoted Kachikwu saying.

    "The sustainable funding of the [joint ventures] will lead to an increase in national production from the current 2.2 million b/d to 2.5 million b/d by 2019," the minister said.

    Nigerian oil production still remains sharply below its capacity of 2.2 million b/d, with the main export grade Forcados still shut in.

    Output has recovered gradually this year as militant attacks have fallen substantially since early January after the government stepped up peace talks in the key producing Niger Delta to end militancy in the region.

    Nigerian crude oil and condensate production is currently around 1.9 million b/d, with almost 350,000 b/d comprising condensates like Akpo, Agbami and Oso Condensate, according to S&P Global Platts estimates.

    Nigeria is currently exempt from the OPEC production cuts because of the issues it is facing with militancy in the Niger Delta.

    The six-month deal, which expires in June, will be up for review at OPEC's next meeting on May 25, with some ministers saying the production cuts should be extended to continue drawing down global inventories.

    Sources have said that with Nigeria restoring output, it could be asked to join the output cuts, if the deal is extended.

    In late November oil minister Emmanuel Kachikwu acknowledged that a fully recovered Nigeria would likely be asked to share in the cuts.

    On the debt to IOCs, Nigeria owed $6.8 billion as at September 2016, under the previous funding mechanism.

    Kachikwu said that in exiting the cash call arrangement, Nigeria secured 25% or $1.7 billion discount on this debt following the agreement reached with the companies.

    "The immediate effect of the new cash call policy will increase net Federal Government revenue per annum by about $2 billion," the minister said.

    Apart from the disruption in the Niger Delta, the lack of proper funding had stunted the growth of Nigeria's oil production and state oil firm NNPC said late last year that joint venture production dropped to about 800,000 b/d now from 1.2 million b/d six years ago following the government's inability to properly fund the joint ventures.

    Kachikwu also said the Nigerian government was in talks with foreign companies for the latter to take more responsibility for infrastructure security in the Niger Delta in a bid to end militancy in the region.
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    Woodside resumes LNG production at Karratha gas plant

    Australian LNG player Woodside said liquefied natural gas production resumed at the Karratha gas plant following an outage on April 15.

    The Karratha gas plant is located some 1260 kilometers north of Perth, Western Australia, and is a part of the North West Shelf project facilities.

    “Domestic gas production was restored at the Karratha gas plant on 18 April following an unplanned outage that occurred on 15 April,” North West Shelf project’s spokesperson said.

    In its emailed response, the spokesperson added the underlying cause of the incident was an electrical fault.

    “We have now recommenced full liquefied natural gas (LNG) production,” the spokesperson said.

    The Karratha gas plant facilities include five LNG processing trains, two domestic gas trains, six condensate stabilisation units, three LPG fractionation units as well as storage and loading facilities.

    It has an annual LNG export capacity of 16.9 mtpa which is supplied mainly to companies in the Asia Pacific region.

    Woodside operates these facilities on behalf of the NWS project participants. Other NWS JV partners are BHP Billiton, BP, Chevron, Japan Australia LNG (MIMI) and Shell.
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    Bassoe: Use ’em while they’re hot. Oil companies should contract more offshore rigs now instead of later

    Oil companies have shunned the offshore industry for the past three years as breakeven costs for new projects haven’t been in line with oil prices. Now oil prices have stabilized, and the consensus is that prices will stay in a $50–70/barrel range for the medium-term.

    At the same time, costs have come down considerably for drilling and services, and oil companies have implemented efficiency programs which allow them to reduce breakeven costs for new projects. Projected costs out to 2020 show that virtually all projects onshore and offshore can tolerate oil prices in the forecasted price band.

    One would think that oil companies would start sanctioning new drilling projects in all segments. But they’re not – at least not on a large enough scale to ensure that global depletion rates don’t reach unsustainable levels. Instead, the current trend is on “short-cycle” onshore projects with high decline rates and on optimizing current production.

    Offshore projects normally offer larger production volumes, but they have higher cost and time requirements. So many offshore projects have been cancelled or put on hold over the past few years that the number of new wells drilled has reached its lowest point ever.

    New, large scale offshore development is needed to maintain oil production at levels that will avert a sudden supply deficit (and a subsequent dramatic increase in oil prices). Oil companies have heard this, and pretty much everyone else has too. But little is being done about it.

    During the past ten years, oil companies spent so much on offshore drilling that field development costs became unsustainable as the oil price started to fall. The price fall didn’t happen fast enough, however, to restrain the expectations of continued high activity in the rig market which led to too many rigs being built.

    When oil prices crashed and everything suddenly stopped, oil companies were left incapacitated, financially constrained, and unable to take on new projects.

    But now that oil companies can operate in a lower cost offshore environment due to high rig supply and better efficiency, they would be better off initiating new projects now instead of later. Although the resulting increase in the oil price from a supply crunch could partially and temporarily offset any of the higher costs oil companies would incur in field development (due to higher rig demand, for example), betting on the extent and longevity of this is risky.

    More importantly, however, continued low activity threatens the viability of their drilling asset base.

    Oil companies risk instability, project delays, and higher costs for offshore projects

    As every day goes by, the negative effects of rig stacking (i.e., longer time to get rigs back into the market, higher risk of operational issues, and higher costs) multiply.

    While tendering activity for offshore rigs is finally increasing, it’s not happening fast enough. Procrastination by oil companies along with their lack of agility and limited offshore focus have driven rig owners into damage control mode. Rig owners have had to implement massive job cuts, defer newbuild deliveries, and stack rigs with up to hundreds of millions of dollars of systems and equipment onboard.

    Extended low (or slowly increasing) drilling activity risks being outpaced by the decreasing number of optimal rigs (i.e., operational, warm stacked, or well-preserved) which are available to oil companies. As we mentioned last week, for established rig owners who implement proper stacking for their rigs, rig oversupply isn’t a major issue – this situation will be great for them. But for oil companies, the consequence of prolonged aversion to sanctioning offshore projects is potentially compromised operations (because, eventually, oil companies will be forced to take “worse” rigs as the supply of optimal rigs decreases).

    Compounding the growing supply of deteriorating rigs is the fact that rig owners are losing skilled personnel. When rigs need to be put back in service and operated, there will be a lack of competence and consistency in the industry.

    Oil companies have kicked the can down the road. When they reach that can again, however, they will find it battered, rusty, and emptier than it was before. And they’ll still need to use it.

    The oversupplied offshore rig market offers oil companies a perfect opportunity. They can find high quality rigs in nearly all offshore regions at dayrates not seen before. Compared to $600,000 per day for a UDW drillship or $180,000 per day for a high spec jackup, they can contract these rigs for less than 50% of those costs now.

    Oil companies should be sanctioning offshore projects faster and taking advantage of a scenario they haven’t seen in decades: low dayrates and high supply of new rig assets. By moving early, they will ensure that they will be able to accommodate the expected need for new offshore wells, keep costs low, and help maintain the rig fleet.

    Attached Files
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    Russia says its oil cut exceeds level demanded in OPEC-led pact

    Russia's oil production on May 1 was 300,790 barrels per day (bpd) below the level in October, meaning it has cut output by more than was demanded under a pact between OPEC and other producers, Russia's Energy Ministry said on Wednesday.

    The Organization of the Petroleum Exporting Countries, along with Russia and other non-OPEC producers, pledged to cut output by 1.8 million bpd in the first half of 2017.

    Under the deal, Russia pledged to reduce its average daily production gradually by 300,000 barrels to 10.947 million bpd from the October level of 11.247 million bpd.

    With global crude inventories still bulging, investors are now focussed on whether OPEC and others will agree to extend the cuts to the second half of the year. The issue will be discussed by the group of producers at an OPEC meeting on May 25.

    Russian Energy Minister Alexander Novak has said he would meet managers of key Russian oil producer before the OPEC event to discuss extending the cuts. Industry sources say such a meeting has yet to take place.

    Novak declined say on Friday on whether Russia would support an extension to the pact. Russia's Deputy Prime Minister Arkady Dvorkovich also declined to comment when asked on Wednesday
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    Iraq's fuel oil exports soar despite OPEC supply cut

    Iraqi fuel oil exports have soared since January despite a reduction in the country's crude production in line with OPEC supply cuts, industry sources said, in what could be a way to boost output of refined products and maintain oil revenues.

    Iraq on average exported between 80,000 and 160,000 tonnes of fuel oil per month in 2016, data collected by Thomson Reuters Oil Research showed.

    But volumes sold to Asia have jumped this year, with Iraq's global exports of fuel oil reaching more than 500,000 tonnes in March alone, according to Reuters data.

    The soaring exports of high-quality straight-run fuel oil (SRFO) are an attempt to support revenues amid the OPEC cuts in which Iraq reluctantly agreed to participate, saying it would reduce crude output by 210,000 barrels per day (bpd).

    Iraq has processed more crude through its refineries, turning it into fuel oil for export, five industry sources with knowledge of the matter said.

    "The Iraqis have been processing more crude internally than exporting it, hence there are more fuel oil exports," said one Middle East-based industry source, speaking on condition of anonymity as he was not authorized to talk to the media.

    A manager at an Iraqi-headquartered energy trading company said: "The Iraqis have been working on optimizing fuel oil exports ... in a move to compensate for the OPEC (crude) cuts."

    Other Middle East trade sources said Iraq had been blending the high-quality fuel oil it produces with either crude or naphtha before exporting it.

    The effect has been felt as far as Singapore, Asia's main oil-trading and storage hub. Trade data compiled by Reuters shows imports of Iraqi fuel oil at 0.94 million tonnes in the first quarter of 2017, nearly double the 0.48 million tonnes imported during the whole of 2016.

    One characteristic of high-quality fuel oil is that it can be used as crude which, according to traders, is what is happening with Iraq’s supplies.

    "This stuff (the fuel oil), it's going straight into refineries," said one Singapore-based fuel oil trader, adding that Shell's 500,000-bpd Pulau Bukom refinery in Singapore had taken several cargoes of Iraqi fuel oil.

    The fuel oil, like crude, is then refined into other products such as jet fuel, gasoline or diesel. Shell declined to comment on the details of its commercial agreements.

    Traders said some of the high-grade fuel oil had also been shipped to the United States.

    Fuel oil is a byproduct of crude oil refining. High-quality variants such as SRFO can be further refined into higher-value gasoline and diesel, while lower-quality fuel oils are typically used in large marine vessels and power plants.

    Iraq's bulging fuel oil exports have contributed to a glut. In Singapore, premiums on fuel oil prices came under pressure in the first quarter as inventories hit a near eight-month high. Likewise, fuel oil inventories in the Amsterdam-Rotterdam-Antwerp hub soared to their highest since records began in 1995 in the first quarter, as fewer shipments were sent to Singapore's already burgeoning storage tanks.
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    Lundin ups output guidance, brushes off Arctic setback

    Sweden's Lundin Petroleum lifted its full year production guidance on Wednesday and said it still expected to find more oil in the Barents Sea despite a recent setback.

    Lundin, a partner in Norway's giant Johan Sverdrup field, reported $355.8 million in earnings before interest, tax, depreciation and amortisation (EBITDA), above the forecast of $325 million in a Reuters survey of analysts.

    Lundin said it was able to increase production capacity at its Edvard Grieg platform to 145,000 barrels of oil equivalents per day (boepd) from its designed capacity of 126,000.

    "This outstanding performance has led us to revise Lundin Petroleum's full year production guidance to between 75,000 and 85,000 boepd, and to reduce our cash operating cost guidance for the full year to $4.90 per barrel," it said in a statement.

    The previous guidance was 70,000-80,000 boepd and $5.30 per barrel respectively, excluding output from Lundin's assets outside Norway that were spun off to International Petroleum Corporation (IPC) in April.

    A recent appraisal well at Edvard Grieg's southwestern flank confirmed the resource upside of gross 10–30 million boe.

    Lundin's Chief Executive Alex Schneiter said it was "fair to assume" that Edvard Grieg plateau production would be extended beyond the original two-year period due to better reservoir performance.

    Lundin has a 65 percent stake in the Edvard Grieg field, Austria's OMV 20 percent and Germany's Wintershall , a unit of chemicals giant BASF, 15 percent.


    Separately, Lundin said it would have to reduce its previous resource estimate of between 91 million and 184 million boe at the Gohta prospect in the Barents Sea after the latest appraisal well turned out to be dry.

    The setback, however, would not jeopardise the development of the nearby Alta find, estimated to contain 125-400 million boe, added the firm.

    "Clearly there will be a reduction on Gohta, but Alta is the main discovery where we have been focusing the development (plans)," Schneiter said.

    Lundin plans to drill an appraisal well at its Alta prospect later this year, and Schneiter confirmed on Wednesday plans to drill two more exploration wells near the Filicudi 35-100 million boe discovery made in February.

    It is also a partner in the Korpfjell prospect in the Barents Sea near the border with Russia, which Statoil plans to drill this summer.
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    CNPC loads first crude oil into Myanmar-China pipeline

    China's state-owned refiner China National Petroleum Corp (CNPC) said it has loaded the first crude oil through its Myanmar-to-China pipeline, the latest step towards supplying crude to its new refinery in Yunnan province.

    Some 1,150 cubic meters per hour of crude flowed into the 770-kilometre (480 mile) pipeline from Tuesday, CNPC said in a statement on Tuesday.

    The move comes almost a month after the first tanker carrying 140,000 tonnes of crude started discharging into the pipeline following the official launch.

    CNPC's PetroChina plans to import overseas oil and pump it through the pipeline to supply its new 260,000-barrels-per-day Anning refinery in landlocked Yunnan province.

    The pipeline starts at Kyauk Phyu in Myanmar's west and enters China at the border city Ruili and is a joint investment by CNPC and the Myanmar Oil and Gas Enterprise.
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    European May styrene premium over feedstocks tumbles to four-year low

    European styrene's premium over feedstocks has tumbled to a four-year low in May as the styrene contract price fell Eur245/mt or 18% over the month, while feedstock costs were largely steady, according to S&P Global Platts data.

    The May styrene contract price was fully settled at Eur1,130/mt ($1,233/mt), down Eur245/mt over the month.

    Despite the sharp fall in styrene, feedstock costs were largely flat.

    The May ethylene contract price was agreed at Eur1,150/mt, unchanged on the month, while the benzene contract price was settled at Eur754/mt, up Eur9/mt.

    Using a formula of 0.29 ethylene to 0.79 benzene to calculate feedstock costs, May costs are estimated at Eur900/mt, up Eur7/mt over the month.

    However, the sharp decrease in the styrene contract level meant that styrene's premium over feedstocks dropped to Eur230/mt. It is also the lowest level since May 2013, according to Platts data.

    "It is the lowest spread [over costs] in four years," a styrene buyer said.

    This is a reversal in fortunes from earlier in the year when the styrene premium over feedstocks was calculated at Eur605/mt, a multi-year high.

    Through April, movement in styrene spot diverged significantly from benzene and ethylene, leading to a large drop in styrene's premium over costs.
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    US gas producer Consol lifts production guidance for 2017, 2018

    US Appalachian gas producer Consol Energy raised its 2017 and 2018 production guidance Tuesday, with company executives saying it is poised for a two-year period of output growth as it reaps the benefits of improved drilling operations and cycle times, among other factors. Consol now expects production of approximately 420-440 Bcf of natural gas equivalent for 2017 and 490-520 Bcfe for 2018, company officials said during a first-quarter results conference call.

    This compares with the previous guidance of 415 Bcfe for 2017 and 485 Bcfe for 2018.

    The company reported strong natural gas production growth from its operations in the Marcellus Shale, where Q1 output jumped 17.3% year on year to 52.9 Bcf (588,000 Mcf/d).

    But production in the dry Utica Shale segment disappointed, falling 34.5% to 11.6 Bcf (129,000 Mcf/d) versus 17.7 Bcf (197,000 Mcf/d) in the year-ago quarter.

    Total oil, gas and natural gas liquids production produced for sales in Q1 fell 2.6% to 95 Bcfe (1.06 Bcfe/d), compared with the 97.5 Bcfe (1.08 Bcfe/d) in the same period of last year. Consol said this overall decline was driven primarily from the output drop in the dry Utica Shale segment.

    "During the quarter, substantial progress was achieved on three important drivers of net asset value per share," Consol President and CEO Nicholas Deluliis said in a statement.

    "First, for E&P, cycle times are down, capital efficiencies are up, and well type curves are further optimized," he said.

    "Second, our asset sales program is in high gear, and we monetized over $100 million to date and expect to be over halfway to the high end of our $400-$600 million asset sales target by the end of the second quarter."


    Company officials said the dissolution last autumn of a joint venture with fellow Appalachian Basin operator Noble Energy allowed Consol to close on three asset sales, for total cash consideration of approximately $108 million, of which the company has received aggregate proceeds of $16 million through the end of Q1.

    Consol exited the 50-50 JV, which the partners had entered into in 2011 to develop the then largely undeveloped Marcellus Shale play, in October in a bid to chart its own course in the Appalachian Basin. The largest of the three asset transactions comprised the sale of about 6,300 net undeveloped acres of the Utica-Point Pleasant Shale in Jefferson, Belmont and Guernsey counties, Ohio, for total cash consideration of about $77 million, or about $12,200/undeveloped acre.

    Separately, the company divested non-core oil and gas assets, pipelines, and surface properties in two separate transactions for total cash consideration of $31 million, it said.

    In addition, Deluliis said the company generated about $100 million in organic free cash flow in Q1 from continuing operations, excluding the asset sales. Consol "used that organic free cash flow to purchase our debt at a discount and reduce interest expense," Deluliis said.


    In its Q1 operational results, Consol said it operated two horizontal rigs and drilled nine wells: seven dry Utica Shale wells in Monroe County, Ohio, and two Marcellus Shale wells in Washington County, Pennsylvania.

    Officials pointed to the increases in drilling efficiency achieved over the past year, which they said helped the producer improve its bottom line.

    "These improvements have led to further reductions in cycle times resulting in the acceleration of activity in 2017," COO Timothy Dugan said in the statement.

    The wells the company drilled in Ohio in Q1 averaged about 9,900 lateral feet, while averaging 21.5 drilling days/well, compared with 24 drilling days/well in Q4 2016.

    At the current pace, a single rig could drill 16 dry Utica Shale wells averaging 10,000 foot laterals each year, marking a 14% improvement compared with Q4 2016, the company said.

    Consol officials also pointed to a drilling record for Marcellus Shale, which the company set in Q1 by drilling 7,380 feet of lateral in 24 hours on the MOR30B well, in Washington County, Pennsylvania.

    In its financial results, Consol reported Q1 2017 net cash provided by operating activities of $205 million, compared with $130 million in the year-earlier quarter.

    Consol posted a Q1 net loss of $34.5 million, narrower than the $96.5 million net loss in the year-ago quarter.
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    Anadarko Petroleum posts bigger-than-expected loss as costs rise

    Oil and gas producer Anadarko Petroleum Corp (APC.N) reported a bigger-than-expected quarterly loss on Tuesday, as expenses rose about 53 percent, failing to offset gains from higher crude prices.

    North American oil producers faced prolonged weakness in crude prices after oil hit near-record lows in February 2016, which chewed into their profit margins and eroded cash flows.

    Anadarko's total costs and expenses surged to $3.88 billion in the first quarter ended March 31, from $2.54 billion in the year-ago period.

    Exploration expenses rose more than eight-fold to $1.09 billion, the company said.

    However, average sales prices for oil were higher in the quarter at $50.34 per barrel, from $29.65 a year ago.

    Total oil and gas sales volumes averaged 795,000 barrels of oil equivalent per day (boe/d), slightly lower when compared with 827,000 boe/d a year ago.

    Net loss attributable to the company narrowed to $318 million, or 58 cents per share, from $1.03 billion, or $2.03 per share.

    On an adjusted basis, Anadarko lost 60 cents per share, largely missing analysts' average estimate of a loss of 24 cents per share, according to Thomson Reuters I/B/E/S.

    The Texas-based company's revenue more-than-doubled to $3.77 billion.

    Attached Files
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    API Reports 4.2 Million Barrel Inventory Draw, WTI Oil Price Pares losses

    The latest weekly American Petroleum Institute (API) inventory data for the week ending April 28th reported a draw of 4.16 million barrels. This followed the 0.9 million barrel draw last week and was a bigger than the expected draw-down of around 2.0 million barrels for the week.

    Distillate registered a decline of 0.44 million barrels after a slight draw in stocks the previous week.

    Gasoline recorded a draw of 1.93 million barrels which came as some relief following the substantial build of 4.4 million barrels last week.

    Cushing recorded a draw of 0.22 million barrels which was the fourth successive draw after a decline of 1.97 million last week.

    Oil prices rallied in European trading on Tuesday with expectations that OPEC would extend production cuts beyond June. There was a peak close to $49.20 for WTI before a sharp retreat in prices during New York trading with fresh five-week lows below $47.50 late in the US session.

    There was no major negative news, but concerns surrounding excess stocks and higher US production continued to undermine confidence and higher Libyan output again had some negative impact on sentiment.

    From around $47.60 p/b ahead of the release, prices immediately edged higher to the $47.80 area with the recovery extending to $47.90. There was relief that all four metrics recorded draws on the week, but oil prices were still sharply lower for the day as a whole and traders remained wary of selling on any significant rally attempt.

    Wednesday’s EIA inventory release will be important given an on-going market focus on increasing US shale production and higher exports which is complicating OPEC efforts to rebalance the market. The fuel data will be an important focus after the sharp increase in gasoline inventories reported last week.
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    Oil Traders Idled as China Refiners Fall Foul of Smog Fight

    A little over a year ago, China’s fast-growing private fuel makers were the newly minted stars of the global oil market, importing crude from the world’s biggest producers and seeking to sell their products abroad in a threat to rivals across Asia.

    Now, as the government cracks down on pollution and a glut of fuel at home, some traders who the refiners lured with an ambition to establish a global footprint are finding they have nothing to do.

    The processors, known as teapots, have been denied export licenses by the government, meaning they’ll have to remain home to compete with state-owned refining giants. That’s a relief for the wider Asian fuel market already overwhelmed by cheap supplies of Chinese gasoline and diesel, according to BMI Research.

    “We had specially hired three independent oil-products traders, who are now basically idled, which is quite a waste,” said Zhang Liucheng, director and vice-president at Shandong Dongming Petrochemical Group, the biggest of the private refiners. “We are still actively pitching to the Chinese government to grant us oil-product export quotas.”

    It’s the latest setback for the private refiners since they burst into the global oil market in 2015 armed with approvals to import crude. After being wooed by OPEC members Saudi Arabia and Iran, as well as trading giants including Trafigura Group and Glencore Plc, teapots have seen their appeal fade over the past year. Apart from the lack of pipeline and storage infrastructure, many face increased government scrutiny on taxes, and there’s mounting concerns about their environmental records.

    To make matters worse, China’s powerful state-owned enterprises haven’t welcomed the competition.

    Pollution Threat

    “The government’s reluctance to grant the teapots export quotas is likely driven by the ongoing debate about their contribution to pollution,” said Michal Meidan, a London-based analyst at industry consultant Energy Aspects Ltd. “The state-owned enterprises have probably sought to lay much of the fault with the teapots on this point.”

    China, the world’s biggest emitter, is strengthening its commitment to fight the air pollution that’s prompted health concerns due to the heavy smog cloaking its cities. The nation’s output of carbon dioxide from the energy industry fell 1 percent in China in 2016, helping emissions flatline for a third year in a row, according to data from the International Energy Agency.

    The government controls fuel-export volumes by granting oil refiners shipment quotas through the year, which they must fulfill or risk a cut or review of those allowances. Private processors didn’t use up the export allocations they received for last year, providing the government with a reason to deny them quotas for 2017, Meidan said. They also contributed to a domestic fuel glut by boosting operations at the end of 2016 to use up crude import quotas.

    “Beijing seems to have realized that while the granting of crude import quotas to teapots have allowed for greater competition at home, rampant buying and subsequent production of fuels have contributed to a domestic glut,” said Peter Lee, an analyst at BMI Research, a unit of Fitch Group. “The relentless surge in Chinese output and exports has swamped the regional fuels market.”

    While the private processors received approval to buy overseas crude in 2017, the amount they’ve been allowed to directly import in the first batch of quotas this year is 62 percent of 2016’s total levels. Meanwhile, the Commerce Ministry awarded 12.4 million tons of fuel export quotas to only state firms in the first batch for 2017. In the second, government-run companies were given approval for a total of 3.34 million tons.

    “Lower Chinese fuel exports will prove supportive for refining margins in Asia, as the region has been grappling with an exodus of Chinese fuels over the past few quarters,” Lee said. “The void created by the easing of Chinese exports could be filled by supplies from the likes of South Korea and Japan that remain keen to win back some market share.”

    A refinery processing Dubai crude in Singapore had a margin of about $3.78 a barrel as of Tuesday, down from a recent peak of $7.38 in January, according to data compiled by Bloomberg.

    China exported a record 15.4 million tons, or about 314,000 barrels a day, of diesel overseas and an unprecedented 9.69 million tons, or 221,000 barrels a day, of gasoline in 2016, data from the nation’s General Administration of Customs show.

    For more on how China is sending fuel across the globe, click here

    Teapots started getting licenses to import foreign crude in 2015 as part of a government effort to boost private investment in China’s energy industry and reform its sprawling state enterprises by encouraging competition. The refiners previously had to rely on state-owned oil majors including PetroChina Co. and China Petroleum and Chemical Corp., known as Sinopec, for supplies of crude.

    “Over the years of China’s oil-market reform, the lobbying power has always been dominated by state oil companies led by PetroChina and Sinopec,” said Li Li, an analyst with ICIS China. “Teapots deserve to look outside China especially when their end market domestically is limited by powerful state competitors. They need the quota like a traveler needs a passport to see what is out there.”

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    ConocoPhillips posts surprise loss on higher-than-expected costs

    ConocoPhillips reported a surprise quarterly loss on Tuesday as operating costs came in higher than expected, sending its shares lower in afternoon trading.

    However, the largest U.S. independent oil producer's results reflected a slow but steady improvement across the industry bolstered by improved pricing for its oil and natural gas. Crude prices are up more than 50 percent from a year ago.

    Don Wallette Jr., chief financial officer, said the latest quarter included a $200 million loss from a currency hedge tied to the British pound and a benefit of about $100 million from a tax loss carry forward.

    The company expects to complete the sale of some Canadian oil sands and natural gas properties this quarter, and will finish a planned $3 billion share buyback by year end, he said in a conference call.

    The Houston-based company said its total realized price was $36.18 per barrel of oil equivalent in the first quarter, compared with $22.94 a year earlier.

    ConocoPhillips's production, excluding Libya, inched up 2 percent to 1.584 million barrels of oil equivalent per day (boepd) in the latest quarter.

    That was higher than Wall Street expectations of 1.571 million boepd.

    "Production was above guidance, but this was outweighed by higher costs," Raymond James analyst Pavel Molchanov said.

    The company's operating expenses of $1.30 billion were higher than Raymond James' estimate of $1.24 billion, Molchanov said. Exploration expenses of $258 million on a pre-tax basis were also much larger than the $70 million Barclays analysts had estimated.

    ConocoPhillips said it expects production of between 1.495 million and 1.535 million boepd for the current quarter, excluding any output from Libya. The estimate does not reflect the impact of recently announced asset sales.

    The oil producer said last month it would sell natural gas-heavy assets in San Juan basin to privately held Hilcorp Energy Co for about $3 billion and earlier agreed to sell oil sands and western Canadian natural gas assets to Cenovus Energy Inc for C$17.7 billion.

    ConocoPhillips has also marked other gas-weighted assets for sale, including some assets in the Anadarko basin, the Barnett shale field, and the Gulf of Mexico.

    Net profit was $800 million, or 62 cents per share, in the first quarter ended March 31, compared with a net loss of $1.5 billion, or $1.18 per share, a year earlier.

    Excluding a gain on the sale of assets in Canada, the company posted a loss of 2 cents per share. Analysts on average were expecting a profit of 1 cent per share, according to Thomson Reuters I/B/E/S.
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    OPEC oil output falls in April but compliance weakens: Reuters survey

    OPEC oil output fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target while maintenance and unrest cut production in exempt nations Nigeria and Libya.

    But more oil from Angola and higher UAE output than originally thought helped OPEC compliance with its production-cutting deal slip to 90 percent from a revised 92 percent in March, according to Reuters surveys.

    The Organization of the Petroleum Exporting Countries pledged to reduce output by about 1.2 million barrels per day (bpd) for six months from Jan. 1 - the first supply cut deal since 2008. Non-OPEC producers are cutting about half as much.

    OPEC wants to get rid of excess supply that is keeping oil below $52 a barrel, half the level of mid-2014. With the oversupply proving hard to shift, OPEC is expected to prolong the agreement.

    Compliance of 90 percent is still higher than OPEC achieved in its last cut in 2009, Reuters surveys show. Analysts including those at the International Energy Agency have put adherence in 2017 even higher, with the IEA calling it a record.

    April's biggest production gain came from Angola, which scheduled higher exports and where output started at the East Pole field in February. The increase brought Angolan compliance down to 91 percent, from above 100 earlier in the year.

    Other, small increases came from Kuwait and Saudi Arabia, the survey found, although their compliance was the second-highest and highest respectively in OPEC.

    Even with April's increase, the total curb achieved by OPEC's top producer Saudi Arabia is 574,000 bpd, well above the target cut of 486,000 bpd.

    Iran's production rose slightly. Tehran was allowed a small increase in output under the OPEC agreement.

    These increases offset lower supply in Iraq, which exported less crude from its southern terminals - and Venezuela, where exports also fell month-on-month, according to tanker data and shipping sources.

    Output in the United Arab Emirates fell, but production in March was higher than originally thought. The UAE, which has been focusing on expanding oil capacity in recent years, has been slower than other Gulf members to trim supply.

    The UAE says it is complying 100 percent. It has blamed suggestions that it is failing to do so on discrepancies between its own production figures and those estimated by the secondary sources that OPEC uses to track compliance.

    Lower output in Nigeria and Libya, which are exempt from the curbs, helped bring down overall OPEC production.

    Maintenance continued at Nigeria's Bonga field for part of the month and loading delays affected the country's biggest export stream, Qua Iboe.

    In Libya, output fell as protests blocking a pipeline prompted the shutdown of the Sharara field. Output there resumed in late April, suggesting May could see higher production if no further unrest emerges.

    OPEC announced a production target of 32.5 million bpd at its Nov. 30 meeting, which was based on low figures for Libya and Nigeria and included Indonesia, which has since left the group.

    The Libyan and Nigerian reductions mean OPEC output in April averaged 31.97 million bpd, about 220,000 bpd above its supply target adjusted to remove Indonesia.

    The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, OPEC and consulting firms.
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    Encana delivers strong first quarter results; company’s multi-basin advantage drives growth and value

    Encana’s first quarter performance strongly underpins its five-year plan and 2017 objectives of returning to growth by mid-year, delivering at least 20 percent production growth in its core assets from the fourth quarter of 2016 to the fourth quarter of 2017 and maintaining or enhancing efficiencies despite sector inflation. Highlights from the quarter include:

    net earnings of $431 million compared to a net loss of $379 million in the first quarter of 2016
    cash from operating activities of $106 million and non-GAAP cash flow of $278 million
    non-GAAP corporate margin of $9.72 per barrel of oil equivalent (BOE), up from $2.92 per BOE in the first quarter of 2016
    core asset production of 237,300 barrels of oil equivalent per day (BOE/d), representing 75 percent of total production
    liquids production of 110,900 barrels per day (bbls/d) including oil and plant condensate production of 87,900 bbls/d, which represents almost 80 percent of total liquids production
    enhanced well performance across the portfolio using an advanced completion design pioneered in the Eagle Ford during the previous quarter
    new Permian 12-well pad delivered peak daily production of 14,000 BOE/d, including 11,000 bbls/d of oil
    infrastructure on schedule to support Montney liquids growth to an expected 70,000 bbls/d by 2019

    “Our culture of innovation and agility drives the real-time transfer of technology across our multi-basin portfolio to create a strong competitive advantage,” said Doug Suttles, Encana President & CEO. “We saw this during the quarter, when the combination of our large multi-well pads, simultaneous use of multiple drilling rigs and frac spreads and advanced completion design drove efficiencies and returns.”

    “Our strong performance through the first quarter gives us a lot of confidence for 2017 and our five-year plan,” added Suttles. “We expect to significantly increase crude and condensate production through the year and deliver strong corporate margin growth. We are boosting well productivity while offsetting inflation through continued operational efficiencies and active supply chain management. Our risk management and marketing programs effectively manage risk and preserve optionality.”

    Strong first quarter results: Encana positioned to meet or exceed 2017 targets
    Encana reported strong financial and operational results for the first quarter, driven by increased liquids production and improved margins. The company expects to grow oil and condensate production by greater than 35 percent and total production from its core assets by more than 20 percent between the fourth quarter of 2016 and the fourth quarter of 2017. This includes an expected fourth quarter ramp up of Montney production when new facilities become operational. The company expects total production will begin to grow from the middle of 2017.
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    North America’s Busiest Oil Dealmaker Turns Focus to Production

    After five years of snapping up more oil assets than any of its peers in North America, Crescent Point Energy Corp. is turning its focus to getting more out of them.

    Chief Executive Officer Scott Saxberg says that rather than scouting for new assets to buy, the company is trying to keep a lid on costs, drilling new wells in the Uinta Basin in Utah and developing operations in the Bakken formation.

    “We’re very focused on our organic growth, getting after our plays,” Saxberg said in an interview at Crescent Point’s Calgary headquarters, which overlooks Canada’s Rocky Mountains. “We have more than 12 years of drilling inventory ahead of us.”

    From 2012 through last year, Crescent Point completed 15 acquisitions, the most of any oil explorer and producer on the continent. While the roughly $6 billion value of those takeovers ranked it fifth — overshadowed by megadeals from giants such as Devon Energy Corp. and Encana Corp. — it still averaged about $402.5 million per transaction.

    As the acquisition spree expanded Crescent Point’s production, the debt it added has weighed on the shares. The company’s debt was about 93 percent of its earnings before interest, taxes, depreciation and amortization for the trailing 12 months to the end of 2012, according to data compiled by Bloomberg. By the end of last year, the company was carrying debt of 2.3 times Ebitda.

    Crescent Point’s stock has been under particular pressure since selling C$650 million ($475 million) of shares in September. The company issued the equity to help pay down debt, but the market instead thought the money would be used primarily to increase production, Saxberg said.

    The offering also was meant to help the company weather a potential dip in oil prices and uncertainty from the U.S. since the election, both situations that are far from being resolved, Saxberg said.

    “That volatility is still there,” Saxberg said. “So we’re happy to have done the financing that’s put us in a strong position for this environment that we’re in.”

    The company’s first-quarter results may have started to change investors’ minds. Crescent Point’s funds flow from operations rose 13 percent to C$427.1 million. Production was the equivalent of 173,329 barrels of oil a day, topping some analysts’ estimates. The shares rose 3.4 percent in the two days following the report.


    “Good operational performance should serve as a nice tailwind for the company,” Chris Cox, an analyst at Raymond James, said in a note. “We see the stock as one of the few oil-levered producers with a compelling valuation, relatively strong balance sheet and a combination of free cash flow and visible production growth.”

    Crescent Point was trading at an estimated enterprise value of 5.6 times earnings before interest taxes, depreciation and amortization, according to data compiled by Bloomberg. That’s the lowest valuation among its 10 peers for whom estimates were available.

    Still, Crescent Point will need to demonstrate continued success at increasing production to win over investors, said Michael Harvey, an analyst at Royal Bank of Canada.

    “Crescent Point’s future growth is highly dependent on continued drilling success within its development plays,” Harvey wrote in a note.

    The company won’t be entirely absent from the deals market, though. In the first quarter, Crescent Point bought about 8,500 acres neighboring its current holdings in North Dakota for $100 million in cash. At the same time, the company agreed to sell conventional assets in Manitoba for C$93.2 million, essentially trading one property for the other.

    “Anything we acquire will be small, tuck-in type acquisitions,” Saxberg said, “and we’ll sell non-core assets to pay for them.”
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    No More Free Lunch!

    Market sentiment was mixed on Tuesday, after Saudi Aramco cut the June official selling price differentials of its Asian-bound crude grades by 20-70 cents/b late Monday.

    Aramco lowered the price of its Asia-bound Arab Light crudes by 40 cents/b to a discount of 85 cents/b to the Platts Oman/Dubai average in June, it said in a statement late Monday. The OSP was the lowest since September 2016, when it was at a discount of $1.10/b, S&P Global Platts data showed.

    It also lowered the price of Arab Medium by 45 cents/b to a discount of $1.30/b to Oman/Dubai, the lowest since January this year.

    Aramco lowered the price of its Arab Super Light by 70 cents/b to a premium of $3.05/b to the Platts Oman/Dubai average in May, the lowest since the beginning of the year.

    It lowered the price of its Arab Extra Light by 60 cents/b to be equal to the Platts Oman/Dubai average in June, and the price of Arab Heavy crude by 20 cents/b from May to a discount of $2.80/b to the Platts Oman/Dubai average in June.

    Traders surveyed by S&P Global Platts last week said they expected Aramco to cut the June OSP differentials of its Asia-bound crudes by up to 40 cents/b from May.

    "[The June OSPs showed] much bigger cuts than I expected. I would say refiners should be pretty pleased," said a Singapore-based crude trader.

    Traders have noted that June-loading Middle East crude cargoes have largely traded in discounts last month, while the Dubai crude structure have weakened, reflecting the weaker demand and supply fundamentals.

    Frontline cash Dubai have averaged at minus 73 cents/b for April to-date, down from minus 27 cents/b in March, and the lowest since November last year, when it was at minus $1.04/b, Platts data showed.

    The Dubai market structure is understood to be a key component in the Saudi OSP calculations.

    Traders added that the narrower Brent/Dubai Exchange of Futures for Swaps last month could have played a part in Aramco's decision when cutting the Asia-bound OSPs.

    The second-month EFS averaged 96 cents/b in April, down from $1.33/b in March and the narrowest since August 2015, when it averaged at 79 cents/b.

    "I guess Aramco [was] trying to counter the narrowing Brent/Dubai by cutting deeper then formula dictates," the Singapore-crude trader said.

    Traders have noted that Middle East crudes are likely to face continued competition from Western arbitrage barrels, with the EFS likely to stay narrow this month.

    "It looks [like EFS could be narrow] this month too," said another crude trader.

    Other traders noted that the cuts were within their expectations, while a trader noted that the cuts for the Asia-bound medium and heavy crude grades OSPs could have been bigger.

    "They lowered the Arab Light, which was within our expectation, but Arab Medium and Arab Heavy [were] not lowered enough," said a North Asian crude trader, adding that Aramco likely expects the demand for medium, heavy grades to remain supported this month due to the summer refining season.

    Latest data from Saudi Arabia in mid-April showed its crude exports fell for a third consecutive month to 6.957 million b/d in February.

    The country's February crude production averaged at 10.011 million b/d, up 263,000 b/d, or 2.7%, from the previous month's 9.748 million b/d.

    This is the second month of data available on Saudi crude output and exports following the implementation of an OPEC-led production cutting initiative.

    Under the November 2016 agreement, the group pledged to hold its combined production at or below 32.5 million b/d for six months from January 1, in order to rebalance the oil market and support prices.

    Saudi energy minister Khalid al-Falih said two weeks ago that he saw an extension of the OPEC/non-OPEC production-cut agreement likely if global oil inventories do not fall to sufficient levels.

    OPEC ministers will meet on May 25 in Vienna to decide whether to extend the production cuts.

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    Mbs speech on Saudi TV

    Budgetary scenarios had been set for an oil price ranging from $45-$55 a barrel, he said.

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    Noble Energy Announces Solid First Quarter 2017 Results

    - Delivered quarterly sales volumes of 382 MBoe/d, with U.S. onshore, Gulf of Mexico, and Israel volumes all at or exceeding the top end of guidance. Total oil volumes of 119 MBbl/d were at the high end of guidance, led by Delaware and DJ Basin performance.
    - Established a record for first quarter sales volumes in Israel at 274 MMcfe/d, even with the 3.5 percent working interest divestment in the fourth quarter of 2016.
    - Continued strong well performance in the Delaware Basin.  Three new Wolfcamp A wells commenced production and had an average IP-30 rate of 1,730 Boe/d (365 Boe/d per 1,000 lateral feet).
    - Increased oil as a percentage of total DJ Basin production to a record 52 percent, driven by continued development focus in the low GOR areas of Wells Ranch and East Pony.  Wells using higher proppant concentrations continue to outperform type curve by more than 50 percent, including initial tests of enhanced completions in East Pony.
    - Solidified Noble Energy’s leading position in the Southern Delaware Basin through the acquisition of Clayton Williams Energy, increasing the Company’s position to 118,000 net acres.  The acquisition closed on April 24, 2017.
    - Sanctioned the Leviathan project offshore Israel, with first gas targeted for the end of 2019.
    - Full year sales volumes trending toward the upper half of original expectations, driven primarily from crude oil and NGLs.

    Noble Energy, Inc. announced results for the first quarter of 2017, including net income attributable to Noble Energy of $36 million, or $0.08 per diluted share.  An adjusted loss(1) attributable to Noble Energy for the quarter in the amount of $23 million, or $0.05 per diluted share, excludes the impact of certain items typically not considered by analysts in formulating estimates.  Adjusted EBITDAX(1) was $600 million.  Total organic capital expenditures for the quarter were $616 million, well within the Company’s guidance range.

    David L. Stover, Noble Energy’s Chairman, President and CEO, commented, “Noble Energy is off to a great start in 2017, with strong operational and financial performance and importantly, numerous recent strategic accomplishments.  Our top-tier U.S. onshore assets and execution are delivering ahead of plan as a result of drilling advancements in all basins and continued industry-leading well performance.  During the second quarter, we are expecting volume growth in each of our U.S. onshore liquids assets.  This is driven by an increased completion schedule, including the impact of the Clayton Williams Energy transaction. Offshore, we are maximizing the cash flow from our existing assets, while progressing the recently-sanctioned Leviathan major project.  With our continued superior execution, I am confident that we will deliver industry-leading performance throughout this year.”

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    Inpex-operated Ichthys falls behind on schedule

    The start of the Ichthys liquefied natural gas (LNG) project has been delayed by months, following delays in the installation of offshore production facilities.

    The 8.9-million-tonne-a-year project had initially been slated to start production in the third quarter of 2017; however, project developer Inpex has now moved this timeline back to before the end of the financial year, being March 2018.

    The company reported on Tuesday that the LNG project’s central processing facility had set sail from its constructionsite in South Korea, and was expected to reach offshore Western Australia within the next month-and-a-half, after which shipyard commissioning and preparation work would be completed.

    The Ichthys floating production, storage and offloading facility is also scheduled to be towed to undergo hook-up.

    The Ichthys project has recently been hit by a number of set backs, including contract disputes between its contractors and claims from construction company Laing O’Rourke that it had not been paid for work on the remote engineering project, prompting the company to withdraw some 600 workers.
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    Cabot is Looking for New Exploration Opportunities

    U.S. unconventional producers significantly reduced exploration activities during the downturn.

    As low commodity prices squeezed producers, most companies focused on reducing costs rather than finding new fields to develop. However, as prices begin to recover Cabot Oil & Gas (ticker: COG) is beginning to look for new opportunities, the company said in its conference call today.

    Cabot expects to spend up to $125 million on exploratory lease acquisition and testing in new areas this year, 15% of total expenditures. The company intends to evaluate new platforms for future growth. According to Cabot Chairman, President and CEO Dan Dinges the company has identified two areas that may have the potential to generate competitive full cycle returns.

    These are areas where we have direct line of sight towards building sizable contiguous acreage positions that allow for an efficient operations at, most importantly, a low-cost of entry,” Dinges commented. Cabot defines a sizeable position as “one that has potential to provide over a decade of high-quality drilling inventory.” But Cabot would not identify the specific plays in its sights.

    These projects are still in the early stages of evaluation, but based on current geo-modeling results Dinges is “cautiously optimistic” about their potential. The company will move forward with leasing and will test its ideas later in the year.

    What to do with free cash?

    Cabot projects positive free cash of over $250 million in the current year. The company is currently evaluating several possible uses of this cash:

    Accelerating production in Cabot’s current areas
    Increase funding for exploration activities
    Increase dividend or share repurchase program
    Reduce outstanding debt

    Like many other unconventional operators, Cabot has reported success from increasing completion intensity. The company’s current design in the Eagle Ford increases proppant per foot by 25%, decreases cluster spacing from 60’ to 25’ and adds intra-stage diversion. This design change has increased well initial production by about 30%.

    Cabot reported first quarter results today, showing net income of $105.7 million, or $0.23 per share. This exceeds the $51.2 million net loss the company reported taking in Q1 2016, and the $292.8 million loss the company experienced in Q4 2016.

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    Offshore fracking? Baker Hughes builds deep-water tool

    Houston’s Baker Hughes has developed a deep-water hydraulic fracturing device, pictured here, called DEEPFRAC, the company announced on Monday, May 1, 2017.

    The Houston oil field services firm Baker Hughes has built a new hydraulic fracturing device for deep-water drilling, and says the service could save operators hundreds of millions of dollars.

    Baker Hughes announced the device, called DEEPFRAC, on Monday morning, as the Offshore Technology Conference was opening at Houston’s NRG Park, home to the National Football League’s Texans.

    Hydraulic fracturing is a laborious, multi-stage process. DEEPFRAC eliminates many of those steps, Baker Hughes said. It uses sleeves that can be set in multiple positions and balls that control the flow of oil and fracking liquids and eliminates the casing and cementing operations. Baker Hughes said the device will provide “unprecedented efficiency gains.”

    To create the device, the company adapted hydraulic fracturing technologies and techniques from the U.S. onshore shale revolution, said Jim Sessions, vice president of completions at Baker Hughes.

    DEEPFRAC will allow companies to frack 20 stages — up from just five, in some cases — and cut certain well completion steps from weeks to days, the company said.

    On a recent job, DEEPFRAC saved about 25 days of rig time and $40 million on a first-ever 15-stage deep-water completion in the Gulf of Mexico, Baker Hughes said.

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    BP's profit triples on higher oil prices, output

    BP's profit nearly tripled in the first quarter of 2017 from a year earlier thanks to higher oil prices and production, and as its sharp cost cutting drive bears fruit.

    BP joined oil major rivals including Exxon Mobil, Chevron and Total in posting stronger-than-expected quarterly earnings, mostly thanks to higher oil and gas prices.

    The results could assuage concerns among investors, who were jolted when BP in February raised the oil price at which it can balance its books this year to $60 a barrel after a string of investments.

    Investors are now turning their attention to cash generation that will allow companies to cover spending and dividend payouts and reduce ballooning debt.

    London-based BP is set to start up eight projects this year, including in Oman and Azerbaijan, the largest number in the company's history in a single year. It hopes to add 800,000 barrels per day of new production by the end of the decade.

    "Rising production from new upstream projects is expected to drive a material improvement in operating cash flow from the second half of 2017," the company said in its results statement.

    BP reported first-quarter underlying replacement cost profit, the company's definition of net income, of $1.51 billion, exceeding analysts' average forecast of $1.26 billion.

    Its operating cash flow in the quarter rose to $4.4 billion from $3 a year earlier

    Oil prices, a major driver for BP's earnings, averaged around 35 percent above prior-year levels, helping to boost revenue from its core oil and gas production division.
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    Another FERC Commissioner Announces Departure

    Federal Energy Regulatory Commissioner (FERC) Colette Honorable said Friday she will leave the board when her term expires in June.

    “After much prayer and consideration I’ve decided not to pursue another term,” Honorable wrote in a note posted on Twitter.

    “I appreciate the strong bipartisan support I’ve enjoyed over the years and look forward to continuing this important work after leaving the commission.”

    Honorable’s retirement raises the possibility of there being only one FERC commissioner by this summer.

    Trump named Cheryl LaFleur acting commissioner of the energy regulatory board in January, and hours later its previous head, Norman Bay, announced he was leaving FERC. The five-member body currently has two members — LaFleur and Honorable — and is short of a quorum.

    Energy industry groups have pushed Trump to nominate new commissioners for FERC, but the White House has yet to reveal who it might tap to sit on the board.

    “The lack of a quorum since February has prevented FERC from making major decisions regarding applications for crucial infrastructure development and improvement across the energy sector,” five gas industry officials wrote in a Washington Examiner op-ed this month.

    The group predicted it would take up to two months for the Senate to vet and approve any President Trump FERC nominees, a worrying prospect for sectors that rely on FERC’s approval power.

    “That means FERC will have been sitting on the sidelines for half the year. The American people can’t afford even one more day,” the groups wrote.

    Honorable, who was nominated to her FERC position by President Obama in August 2014, was confirmed unanimously by the Senate that December.
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    Suncor Restarts Heavy Canadian Oil Shipment From Syncrude Oil Sands

    Suncor Energy said on Monday that pipeline shipments from the Syncrude Mildred Lake Oil Sands facility in Canada had resumed after completing repairs following a fire at the upgrader on March 14.

    Over this past weekend, Syncrude completed the necessary repairs and start-up activities, and shipments had begun, Suncor said. Currently, pipeline shipments are at around 140,000 bpd (gross), and are expected to increase as additional units complete turnaround activities. Production at the facility is expected to return to full rates in June, Suncor said.

    On March 27, two weeks after the March 14 incident, Suncor said that Syncrude had advanced the planned eight-week turnaround originally scheduled to begin in April, in order to mitigate the impact of the unplanned outage. In the last update to the market before the announcement of the restart of the pipeline, Suncor said on April 19 that it had launched an accelerated repair schedule to restart pipeline shipments at some 50 percent capacity in early May.

    The suspension of operations at Syncrude’s upgrader in Alberta lifted Canadian oil prices substantially in early April, also strengthening U.S. blends that make up WTI, as the bulk of Canadian synthetic crude and heavy oil sands crude is exported to its southern neighbor. As a result, prices of Canadian heavy crude jumped to the highest in two years, while the price of synthetic crude, which is what the Syncrude facility produces and a lot of oil sands producers use, rose to a four-year high.

    As this supply disruption of Canada’s heavy crude oil supply to the U.S. was coinciding with reduced shipment to the U.S. from OPEC, analysts had expected that Gulf Coast refineries would buy in April as much Mexican crude as they can, because higher Canadian crude prices made the similar Mexican grade cheaper and therefore more attractive.
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    No Slowing the Permian Land Grab: Centennial Resource Development Enters the Northern Delaware

    Raising our 2020 oil production target to 60,000 BOPD: Centennial CEO Mark Papa

    Denver’s Centennial Resource Development, Inc. (ticker: CDEV) said on Monday it is acquiring undeveloped acreage and producing oil and gas properties in the core of the Northern Delaware basin from privately held GMT Exploration for $350 million in cash. The acreage total in the acquisition comes to 11,860, all in Lea County, N.M.

    Pro-forma for the pending acquisition, Centennial is raising its 2020 production target to 60,000 BOPD from the previous target of 50,000 BOPD.

    The company said in its press release that the acquisition increases its Delaware basin position to ~88,000 net acres from ~76,000 net acres at year-end 2016. The acreage is located in Southern New Mexico directly north of the Red Hills area. Centennial said about 67% is held by production and that it expects less than one operated drilling rig is required to hold acreage.

    The company said it is now targeting a four-year compound annual oil growth rate of approximately 80% from 2016 to 2020.

    Acquisition overview

    11,860 net acres in Lea County, New Mexico, 79% operated with 85% average working interest•  77% State Lands, 19% Federal and 4% Fee
    Average net production of approximately 2,100 BOEPS during Q1 2017Approximately 77% oil
    Identified approximately 255 gross horizontal drilling locations in the Avalon Shale, 2ndBone Spring Sand, 3rd Bone Spring Sand and Wolfcamp A formations
    Estimated undeveloped resource potential of over 91 MMBOEAdditional upside potential from the 1stBone Spring Sand, 2nd Bone Spring Shale, 3rd Bone Spring Carbonate and Wolfcamp B formations
    Significant upside potential related to additional zones and future downspacing
    Current inventory includes drilling locations in four zones•  Conservative inventory spacing compared to offset operators•  Potential upside from four additional prospective zones

    No strangers to the Northern Delaware: Papa

    “This is an area where our geoscience and reservoir teams have built their careers and worked these geologic formations,” said Centennial Resource Development Chairman and CEO Mark G. Papa.

    “We expect well results in this Northern area to provide rates of return that are competitive with our existing portfolio. Based on this newly combined entity, we are raising our 2020 oil production target to 60,000 barrels per day. We can achieve this goal while still maintaining some of the lowest debt metrics relative to our peers.”

    Four primary targets

    Centennial said its chief targets are the Avalon Shale, 2nd Bone Spring, 3rd Bone Spring and Wolfcamp A formations.

    Assumptions include 255 gross horizontal locations in the four formations, based on 660-foot to 1,056-foot spacing, the company said. Based on this analysis, Centennial said it foresees additional development and downspacing potential may exist across the acquired acreage position.
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    Libya's oil output hits 760,000 bpd, highest since 2014: NOC

    Libya's oil production has risen above 760,000 barrels per day (bpd), its highest since December 2014, the National Oil Corporation (NOC) said on Monday.

    Chairman Mustafa Sanalla said in a statement the NOC was working on plans to increase production further. He has previously set a goal of boosting output to 1.1 million bpd by August.

    The NOC gave no breakdown for the latest production increase, but it is mainly due to the reopening of the major western field of Sharara last week.

    Sharara was producing more than 200,000 bpd before its operations were halted by pipeline blockades twice in the past two months, causing national output to drop to less than 500,000 bpd.

    The NOC said on Thursday that the lifting of the blockade at Sharara would also allow production to resume at the nearby El Feel field, which can pump 80,000 bpd.

    The news of the restarts contributed to a dip in global oil prices. Libya along with Nigeria was exempted from a recent agreement by the Organization of the Petroleum Exporting Countries (OPEC) to limit output.

    Libya's production remains well below the 1.6 million bpd the North African country was producing before a 2011 uprising, but gains to production remain vulnerable to political turmoil and armed conflict.

    Production has been repeatedly disrupted in recent years by stoppages and port blockades usually linked to demands for salary payments or funds for local development. Closures since 2013 have deprived Libya of more than $130 billion in revenue, according to the NOC.

    Some oil facilities have been badly damaged by previous fighting, and the NOC also faces major technical and financial challenges in returning them toward full capacity.
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    Rig Count Sees Double-Digit Gains

    More than twice as many rigs active today compared to a year ago

    Drilling activity in the United States continues to increase with the rig count making a double-digit jump in the week ended April 28, 2017, according to Baker Hughes Industries. The total number of rigs in the U.S. reached 870, up 13 from a week ago. The rig count is now 450 rigs higher than at this time last year.

    Rigs drilling for crude oil increased by nine to a total of 697, while those targeting natural gas increased by four to 171. Drilling offshore slowed, with Baker Hughes reporting three fewer rigs offshore week-over-week for a total of 17 offshore rigs.

    The Permian continued to see additions to its rig count this week, but it was the Eagle Ford which recorded the largest week-over-week growth. The Eagle Ford reported five additional rigs this week for a total of 83. The Permian remains the most active, however, with 342 rigs this week, up two from this time last week.

    The Cana Woodford and Haynesville reported four and one additional rigs, respectively. No basins reported fewer rigs from the previous week.
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    Saudi Arabia may cut June light crude prices to nine-month low

    Top oil exporter Saudi Arabia is expected to cut the price of its flagship Arab Light by 40-50 cents a barrel in June to the lowest in nine months, a survey of Asian refiners showed.

    Official selling prices (OSPs) are expected to fall across the board for Saudi crudes sold to Asia in June, after a fall in the Middle East benchmark Dubai crude due to ample oil supplies, the survey of five refiners found.

    "We expect Saudi OSPs to fall as the spot market has collapsed amid oversupply," an analyst with a North Asian refiner said, adding that the June Arab Light OSP will drop by at least 50 cents a barrel.

    Reflecting weak demand, the spread for first and third month cash Dubai prices widened in contango in April from a month ago, traders said.

    In a contango market, prompt prices are lower than those in future months as ample supplies weigh on the spot market.

    Last month, almost all grades of Middle East crude loading in June traded at discounts to their price markers as they faced stiff competition from record flows of oil shipped to Asia from Europe and the United States in recent months, particuarly as U.S. shale production grows.

    Demand from China and Japan has also slowed as some refining units have yet to return from maintenance, while independent Chinese refiners are waiting for more import quotas to be issued by Beijing.

    Most of the survey respondents expect Arab Light crude to be cut by 40 cents in June. The respondents expect smaller price cuts for Arab Medium and Arab Heavy crude as Saudi Arabia could continue to tighten exports of these grades to comply with a deal by OPEC and some non-OPEC producers to cut output.

    The Organization of the Petroleum Exporting Countries will decide in late May whether it will extend output cuts for another six months in a bid to draw down global inventories.Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.

    State oil giant Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

    Saudi Aramco officials as a matter of policy do not comment on the kingdom's monthly OSPs.
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    Unite Takes Another Step Towards UKCS Strike Action

    UK union Unite takes another step towards strike action on the UKCS, as it serves an official strike ballot notice to the Offshore Contractors Association (OCA).

    UK union Unite took another step towards strike action on the UKCS, as it served an official strike ballot notice to the Offshore Contractors Association (OCA).

    “Our members are growing angry over the behaviour of the OCA employers,” Unite Regional Officer John Boland said in a statement sent to Rigzone.

    “If we are going to settle this dispute, we need substance, not spin. Until we get genuine commitment from the OCA to improve their offer, we will continue to act on our members’ wishes, and give them the chance to have a say on possible industrial action, including strike action,” he added.

    After receiving the notice, the OCA said it remains willing to implement a 2 percent increase in basic pay for offshore employees, despite the trade unions announcing plans to hold an industrial ballot.

    This level of pay increase has already been rejected by Unite members, however, Boland highlights.

    “We believe that our offer balances the need to reward employees while supporting the requirements of each OCA member company and our collective overarching aim; to ensure job opportunities in the North Sea now and in the long-term,” Paul Atkinson, CEO of the Offshore Contractors Association, said in a statement sent to Rigzone.

    “We will continue to do all we can to avoid any disruption. Industrial action will only serve to make investment in the North Sea less attractive and jeopardise the long-term future of the industry,” he added.

    Earlier this month, Rigzone reported that the threat of strike action on the UKCS had increased, after Unite and the Offshore Contractors Association failed to settle a dispute over pay.

    Independent conciliation organization ACAS met with representatives from both Unite and OCA April 19, with Unite confirming after the meeting that it would push ahead with preparations for official industrial action ballots.

    Strike ballots are expected to last for two months, according to a Unite representative.
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    Surging Chevron, Exxon profits signal oil industry turnaround

    Rising crude prices helped Chevron Corp and Exxon Mobil Corp easily beat Wall Street's profit expectations on Friday, a sign the oil industry has regained its footing after a two-year price spiral.

    While cost cuts and asset sales provided a boost to both companies, the results highlighted the slowly improving dynamics for the energy industry as oil prices  have climbed more than 50 percent since early 2016.

    The results were especially strong at Exxon, where quarterly profit more than doubled to $4.01 billion.

    Chevron swung to a quarterly profit and turned cash flow positive, earning more than it spent, a milestone Wall Street had long sought.

    Shares of Exxon rose 1 percent and shares of Chevron were up 1.3 percent.

    Their energy peers, BP Plc  and Royal Dutch Shell Plc , are set to report quarterly results next week.

    Looming over the large international oil companies, though, is uncertainty over whether the Organization of the Petroleum Exporting Countries will extend a production cut when it meets next month in Vienna. Should the cut not be continued, oil prices would likely drop, pushing the sector back into recession.

    Chevron and Exxon expanded production in their American shale portfolios during the quarter, with both deciding that the low-cost fields were an easy opportunity to boost profit.

    Chevron, the second largest leaseholder in the Permian Basin, which is the largest American oilfield, has devoted much of its 2017 capital budget to shale projects. Chief Executive Officer John Watson told Reuters earlier this month the Permian was vital to Chevron's growth.

    Exxon doubled its acreage holdings in the Permian Basin of West Texas earlier this year in a deal worth up to $6.6 billion. It was the largest oil industry deal in the first quarter, highlighting how important it was for Exxon to grow in the oil-rich region.

    In Asia, both companies expanded liquefied natural gas operations. Chevron brought a third processing facility online at its Gorgon LNG project in Australia, and Exxon bought InterOil in a $2.5 billion bid to expand in Papua New Guinea.

    Exxon also bought a 25 percent stake in a Mozambique gas field last month in a deal worth up to $2.8 billion.

    Attached Files
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    Australian gas pipe builder Jemena plans expanded line to ease supply woes

    The builder of an A$800 million ($600 million) gas pipeline that could ease a looming shortage in eastern Australia said on Friday it will boost the capacity of the planned pipeline if a ban on fracking in Australia's north is lifted.

    Jemena, owned by State Grid Corp of China and Singapore Power, which is building the 622 km (386 mile) pipeline from northern Australia to Queensland state, is also "well advanced" in plans to extend the pipe further east, a company spokesman told Reuters.

    The comments come amid a growing gas supply crisis in Australia that on Thursday prompted the national government to lay out a radical plan for restricting liquefied natural gas (LNG) exports in order to keep a lid on domestic prices.

    Jemena's pipeline from Tennant Creek to Mount Isa is seen as a crucial leg in easing the shortage in the east, by potentially unlocking the vast gas resources in central and northern Australia.

    The Northern Territory government is currently reviewing a ban on fracking in the region, but has set no deadline for making a decision.

    "We do expect to boost the capacity of the pipeline, provided the moratorium in the Northern Territory is lifted and additional gas supplies made available," Jemena spokesman Michael Pintabona told Reuters on Friday.

    "The whole landscape has changed with the release of the forecast that there'd be shortages."

    He added that Jemena is "well advanced in our feasibility studies" to extend the pipeline further east, to connect with the Wallumbilla gas hub, and so reach east-coast markets where gas prices have soared.

    "What our ultimate plan is, is that once that gas supply is shored up in the Northern Territory, we'll be able to pump through as much gas as is required," Pintabona said.

    Rivals had criticised Jemena's decision, taken a year ago, to build the pipe narrower than planning permission allowed.

    That choice was taken in April 2015 ahead of an expected decision to put a moratorium on fracking, which was seen limiting potential gas flows along the pipe, Pintabona said.

    However, the pipeline's capacity could be expanded by duplication, or by increasing the pressure of the gas by installing additional infrastructure, he said.

    Construction of the pipeline is yet to begin, owing to delays securing approvals.

    A spokeswoman for Northern Territory Resources Minister Ken Vowles was not immediately available for comment.
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    China's oil stockpiling in first-half 2016 slows on tank shortage

    China added 9.34 million barrels of crude oil to Strategic Petroleum Reserves (SPR), worth just over one day's imports, during the first half of 2016, government data showed on Friday, cementing an analyst view that a few tankages were ready for fill during the period.

    Since 2015, China's record amount of crude oil imports have been driven more by flows into the country's independent refineries rather than government stockpiling.

    China boosted its SPR across nine bases by adding 1.28 million tonnes of crude oil in the first half of 2016, the Commerce Ministry said on Friday, in their first update in eight months on one of the world's largest oil reserves.

    By mid-2016, the government had 33.25 million tonnes of crude oil, equivalent to 243 million barrels, up from 31.97 million tonnes at the start of 2016. That equates to an average fill rate of 52,000 barrels per day.

    The government's last update was in September last year.

    Seng-Yick Tee, analyst with consultancy SIA Energy, said 9.34 million barrels of crude oil or 102,000 barrels per day (bpd) were mostly added over a period of three months instead of six.

    Based on data provided from China's National Bureau of Statistics, the country had marked 43 million barrels during the second half of 2015, suggesting a fill rate of around 240,000 bpd.

    "Today's announcements confirm our earlier view that the government's previous update was referring to stockbuild by March 2016 rather than the beginning of the year," said Tee, adding there were a few new tankage space available during the period.

    However, the pace of stockpiling quickened in the second half of 2016 as national oil firms started pumping fuel into two main new bases -- Tianjin in the north and Zhoushan on the east coast, Tee explained.

    SIA Energy estimates the government's stockpile reached around 5.6 million tonnes, or 222,000 bpd, during the second half of 2016, before it drops to 138,000 bpd for this year due to lack of new storage space.

    Reuters has reported that China completed construction of 19 million barrels of new strategic reserve tanks in Zhoushan in August after several delays, and the construction of a large government reserve site in southern Guangdong is taking longer than expected.

    Attached Files
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    Falcon Oil and Gas flying strong on Australian shale finds

    Global oil and gas group Falcon experienced a “landmark” year in 2016, according to chief executive Philip O’Quigley.

    The Dublin-headquartered firm successfully completed the drilling of the Beetaloo well in the Northern Territory of Australia to a total depth of 3,173metres with “very encouraging results”.

    Hydraulic stimulation of the horizontal Amungee NW-1H well was also completed, indicating a material gas resource.

    However completion of the nine well exploration and appraisal programme will be delayed pending the outcome of the independent scientific inquiry on hydraulic fracturing.

    Processing of Falcon’s exploration license application in South Africa’s Karoo Basin continues to progress and the South African Department of Mineral Resources is expected to issue licences in 2017.

    The firm remained debt free with cash of US$10.1 million at 31 December 2016.

    General and administrative expenses decreased 18% year on year to $2.0 million.

    Total net loss for the year 2016 was $3.6million. The bulk of this came from cash going into operating activities.

    CEO O’Quigley said: “2016 was a landmark year for our company with the first extended production test in the Beetaloo basin and the announcement of a material gas resource.

    “Our 2017 drilling program is delayed pending the outcome of the independent scientific inquiry on hydraulic fracturing, however we are hopeful of a favourable outcome and the resumption of drilling in the not too distant future.”

    Attached Files
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    Total sanctions the development of Vaca Muerta shale resources and increases its participation.

    Total has sanctioned the development of the first phase of the operated Aguada Pichana Este license in the giant Vaca Muerta shale play in Argentina. Moreover, the Group will also increase its interest in the license from 27.27% to 41%.
    Gas production from the project will be treated at the existing Aguada Pichana gas plant which will thus reach its full capacity of 16 million cubic meters per day (100,000 barrels equivalent per day).
    "Launching this project is a key milestone in the development of the giant Vaca Muerta shale play. Total is also increasing its interest in the East part of the Aguada Pichana concession where the results of pilot wells drilled to date have been excellent. The development will benefit from the use of existing facilities, enabling the production of shale gas at a very competitive cost,” said Arnaud Breuillac, President Exploration & Production. “This is one of the ten major projects that Exploration & Production plans to sanction in 2017-2018, taking advantage of the favorable low cost environment, which is now approved and will contribute to the Group’s production growth beyond 2020.”
    Total’s decision follows the announcement by the Argentine Ministry of Energy and Mines of the “Program for Stimulation of Unconventional Gas Developments” which guarantees gas prices until 2021.
    As part of the project, the Aguada Pichana partners (Total Austral S.A. 27.27%, YPF S.A. 27.27%, Wintershall Energia S.A. 27.27% and Panamerican Energy LLC 18.18%) have entered into a memorandum of understanding that includes an increase of Total’s participation to 41% in the Aguada Pichana Este project being developed. The agreement remains subject to the approval of Neuquen Province authorities.
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    Australia's LNG export control plans raise alarms in Queensland

    The Australian government's decision to enforce export controls on LNG to protect domestic supply has raised concerns among Queensland LNG exporters, which have international contractual commitments for more than 25 million mt, mainly with northeast Asian buyers.

    Exactly how the mechanism will work is not clear yet, but the government is planning to block LNG exports if there is not adequate supply of gas domestically, Prime Minister Malcolm Turnbull announced on ABC Radio Thursday morning local time.

    The move comes in response to concerns that the eastern seaboard of the country could face gas shortages by the end of the decade, but the risk of a lengthy supply deficit in the region is still low.

    "Out to around 2021, we do not think a gas shortage is likely," said Matt Howell, senior research analyst, Australasia upstream oil and gas, with Wood Mackenzie.

    "Supply from the CSG-LNG projects and other existing producers should be available to fill any demand/supply shortfall. However, that is not to say that there might not be short-term shortages in periods of high demand or if there are supply disruptions."

    The risk of gas shortages increases post-2021, Howell said, and alternative sources of supply will need to be developed to prevent a shortage from occurring as existing supply drops off.

    Participants in the Asia-Pacific LNG markets said export controls would have a negligible effect on global trade flows in the near term.

    But a northeast Asian long-term buyer of Queensland LNG highlighted that renegotiating or obtaining supplies from alternative sources would come at a significant cost if such a ruling was eventually enforced.

    According to Platts Analytics, the combined size of eastern and southeastern Australia's interconnected pipeline gas markets is less than half of the export capacity of the three LNG plants on Queensland's Curtis Island, which amounts to around 95 million cu m/d.


    Turnbull's announcement follows meetings between the federal government and top executives from the country's gas companies in recent weeks, during which two of the three east coast LNG exporters -- Australian Pacific LNG and Queensland Curtis LNG -- committed to being net suppliers to the domestic market.

    Santos, operator of the third east coast LNG exporter, Gladstone LNG, on Thursday said that it will supply more gas into the domestic market than it purchases for its share of LNG exports.

    "Santos will seek clarification of how the new policy will work in practice in order to understand from the government the terms on which it is proposing to introduce this mechanism and how proposals that have been put to the government to address the domestic market situation are being considered," it said in a statement in response to the announcement.

    In the January-March quarter, Santos' share of GLNG sales was 400,900 mt, with its own product making up 172,900 mt of the sales and third-party product contributing 228,000 mt, the company said last week.

    APLNG CEO Warwick King said Thursday that while the company reaffirms its commitment to be a domestic net contributor -- and that it has been since its inception in 2008 -- it does not support the government's move.

    "In the past six months, APLNG completed more than 100 domestic gas transactions, many with Queensland manufacturers, supplying 62 petajoules on long-term contracts and a further 20 PJs in incremental sales," he said.

    "APLNG does not support additional regulation such as export permits, as these sorts of interventions will not increase supply or decrease price in the near or long term."

    "Australian energy market challenges can only be resolved by engaging with all the energy sector. Producers, explorers, transporters, and retailers, not just the Queensland LNG industry, need to work collaboratively together to address ongoing concerns," he said.


    Turnbull said the move could potentially more than halve domestic gas prices.

    "We have seen that because of these anticipated shortfalls, gas suppliers have been proposing contract prices which are really way too high. They are as much as four or five times the price per gigajoule ... that are being offered in the United States," Turnbull said.

    "[Under the new measures, gas] will be cheaper than the prices being offered now. Now people are being offered prices of [A]$20 a gigajoule. It should be half that or less," he told ABC radio.

    Platts JKM for cargoes to be delivered in June was assessed at $5.75/MMBtu on Wednesday, down 41% since the start of 2017. Platts JKM averaged $7.02/MMBtu for the first three months of the year.

    The Australian Petroleum Production and Exploration Association said the export controls are a short-term measure that risk exacerbating tight market conditions unless accompanied "by genuine reforms."

    "There is no doubt the east coast gas market today is tight," APPEA CEO Malcolm Roberts said Thursday.

    He said the main issue is that state governments, such as New South Wales and Victoria, are preventing the exploration and development of new gas supplies.

    "The only way to ensure long-term energy security is to remove restrictions and make it possible for explorers to find new gas fields and producers to develop these resources. The only solution is more gas, not more regulation," Roberts said.
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    BP finds hidden trove of oil in Gulf of Mexico via new subsea imaging

    British oil major BP has discovered 200 million barrels of oil in a hidden cache in the Gulf of Mexico, thanks to a technological breakthrough allowing the company to see beneath geological formations that had befuddled oil exploration for decades.

    The find, worth a potential $2 billion in recoverable oil, is in an undrilled section of BP’s Atlantis field in 7,000 feet of water 150 miles from New Orleans. Long obscured by a salt dome, which distorts seismic waves that oil companies use to map features below the earth, the oil reserves were revealed by using a supercomputer and mathematical algorithm to interpret the seismic data in a new way.

    The Gulf find is another example of oil companies advancing technology to make unexpected discoveries. The advent of seismic imaging allowed oil and gas companies to model mineral layers below the earth’s surface and drill more precisely. The combination of horizontal drilling and hydraulic fracturing unleashed the U.S. onshore shale revolution.  Now, BP’s imaging advance could save drillers hundreds of millions of dollars in false starts and dry wells, and perhaps more important, prevent them from passing up billions of dollars in oil hidden within reach of existing platforms and pipelines.

    Salt has been a barrier

    Salt domes have stumped scientists for years. Such geology in deep water is usually promising because the formations trap oil and gas in underground pockets for easy extraction. But companies hadn’t been able to image under the domes with much clarity.

    Scientists at the BP’s Energy Corridor office park worked for years to improve subsea imaging under salt domes and identify new oil deposits. Then, last year a BP scientist fresh out of out of graduate school asked his bosses if he could borrow the company’s 15,000-square-foot supercomputer to run an algorithm he had developed.

    Xukai Shen wanted to use the machine for two weeks. And in that time he and his team produced a new image with much more detail of the earth layers under Atlantis.  Via traditional methods, such analysis would require at least a year of painstaking data comparison for geophysicists. Shen and his team did it in little more than two weeks, and created a much more accurate model.

    “It produced the best image of the field we’ve ever seen,” said Etgen, the project’s principal researcher. “We basically fell out of our chairs.”
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    Alternative Energy

    Turning Plastic to Oil, U.K. Startup Sees Money in Saving Oceans

    At a garbage dump about 80 miles west of London, Adrian Griffiths is testing an invention he’s confident will save the world’s oceans from choking in plastic waste. And earn him millions.

    His machine, about the size of a tennis court, churns all sorts of petroleum-based products -- cling wrap, polyester clothing, carpets, electronics -- back into oil. It takes less than a second and the resulting fuel, called Plaxx, can be used to make plastic again or power ship engines.

    “We want to change the history of plastic in the world,” said Griffiths, the chief executive officer of Recycling Technologies in Swindon, a town in southwest England where 2.4 tons of plastic waste can get transformed in this way daily as part of a pilot project.

    For financial backers including the U.K. government and more than 100 private investors, the technology could mark a breakthrough in how plastic is managed globally. The machine uses a feedstock recycling technique developed at Warwick University to process plastic waste without the need for sorting, a major hurdle that has prevented economically viable recycling on a grand scale.

    Griffiths’ project is unique in that it doesn’t target a specific type of plastic, but rather seeks to find a solution for the so-called plastic soup inundating the world’s water bodies. By 2050, plastic will outweigh fish in the oceans, according to a study presented at this year’s World Economic Forum by the Ellen MacArthur Foundation.

    “It could be a real game changer,” said Patricia Vangheluwe, consumer & environmental affairs director at PlasticsEurope, a trade association representing more than 100 polymer producers, including BASF SE and Dow Chemical Co. “This is a great way of getting plastics that you would not be able to recycle with current technology, or do that in an economic way, back into the circular economy.”

    At the moment, only about 10 percent of plastic gets reprocessed because it’s cheaper to pump new oil for petrochemical feedstock, especially after crude prices collapsed in recent years. The rest is incinerated, disposed in landfills, or dumped into oceans, releasing toxic chemicals that harm coral reefs and get swallowed by the marine life humans eat.

    Many projects fail because they don’t offer a big enough margin to make them viable, according to Nick Cliffe, innovation lead in charge of resources efficiency at Innovate U.K., one of two government agencies that’s provided 2.6 million pounds ($3.4 million) of grants to Recycling Technologies.

    “Recovering raw materials from the waste stream is the future,” said Cliffe, whose team also finances projects that recover platinum from old electronics and calcium from eggshells.

    A former car assembly-line designer, Griffiths wants to mass produce his machine, called RT7000, and then lease them. It can fit into five shipping containers, a fraction of the size of standard recycling systems. The idea is for it to be transported to the site of the problem, like a beach in a developing country where garbage washes up regularly and local recycling is limited.

    Plastic Waste

    Factoring in a cost of 3 million pounds to install and 500,000 pounds annually to operate, Recycling Technologies expects revenue of 1.7 million pounds per year per machine, thereby recovering its initial investment in 2-1/2 years, he says.

    “That was always the objective, to make a machine that could pay for itself, because then people will make the investment decisions and it can scale very quickly,” said Griffiths, 48, who aims to have 100 RT7000s up and running by 2025. The county of Perthshire, Scotland will start using one in 2018 to turn 7,000 tons of plastic waste annually into 5,000 tons of Plaxx.

    One recent afternoon at the Swindon plant, workers heaped plastic onto a conveyor belt via a tube. The materials move through a series of units that separate out stuff like rocks, dirt and caked-on food. Once that’s done, the plastic enters a furnace-like box and is heated at around 500 degrees Celsius (932 degrees Fahrenheit) using hot sand-like particles that melt it into vapor.

    The technique is similar to thermal cracking, whereby crude is transformed into gasoline and jet fuel, only a different material is used in heating that Recycling Technologies is in the process of patenting, according to technical director Mike Keast, a former oil refinery designer.

    “We have to create new technology so we can both live how we want and not destroy the planet,” he said, shouting to be heard over the screech of Coke and Sprite cans being pressed into cubes at an aluminum-can crusher next door.

    The vapor is cooled at different temperatures to create one of three materials, each emerging from separate taps at the bottom of the machine. Out of one, a straw-colored light fuel that can be sold to petrochemicals companies. A second pumps out a heavier substance reminiscent of candle wax, similar to what’s burned in ship engines. From the third, a thick brown wax that can be used to make shoe polish or cosmetics.

    Griffiths says he’s in talks with about five petrochemical firms for supply agreements, although he wouldn’t give details. German chemical maker BASF, for one, expects feedstock recycling technologies will be “important supplement” to waste-treatment options, according to spokeswoman Christine Haupt.

    While he and his staff of 22 are driven by a desire to protect the oceans, they concede that with plastic consumption set to double in the next 20 years, recycling must be profitable to make a difference. Griffiths’ next goal is to build a manufacturing facility.

    “I’m not a tree hugger,” he said. “I don’t think that you can change environmental things without it actually making money.”

    Attached Files
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    Solar records, strong wind push German Apr power average to 8-month low-What it means for Europe-low

    German wind and solar power output in April was up 23% on year at the second-highest level following March's all-time-high with fresh solar records helping to push the monthly spot power average to an eight-month-low, S&P Global Platts pricing data and grid operator data show.

    Day-ahead power prices averaged at Eur29.26/MWh in April, the lowest since August last year and only 20% above last year's April average after low wind production helped to boost the January and February averages by over 80% compared to record-lows in early 2016, Platts pricing data shows.

    Germany's estimated 93 GW fleet of wind turbines and solar panels generated 12.4 TWh of electricity in April, averaging just over 17 GW each hour and almost doubling since 2013, the TSO data compiled by think-tank Fraunhofer ISE shows.

    Wind output was up 37% on year at 8.2 TWh, while solar output was just 2% higher than in April last year at 4.2 TWh, it said.

    However, solar reached new all-time hourly and daily production records at 27.5 GW on April 30 at 1:00 pm with the daily output of 252 GWh pushing hourly prices on the last April Sunday deep into negative territory on the Epex Spot exchange.

    The data is based on measured estimates by the four TSOs with complete data sets only available at a later stage.

    Combined wind and solar output peaked above 40 GW on six days in April with a further seven days registering peaks above 30 GW with the maximum/minimum output levels swinging between a record 48.8 GW and just 1.2 GW, the data shows.

    The record renewables surge in March and April follows four months of below-average wind conditions stretching back to November, which at times overshadowed the continued boom in German renewables installations with both wind and solar additions up another 10% in the first quarter and Germany's installed wind and solar portfolio expected to reach 100 GW by summer 2018.

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    Tesla's revenue more than doubles, helped by record deliveries

    Electric-car maker Tesla Inc (TSLA.O) on Wednesday reported first-quarter revenue that more than doubled, and while saying the upcoming Model 3 was on schedule for July, it downplayed the mass-market vehicle to give a sales pitch for its more expensive Model S.

    Chief Executive Elon Musk's bold approach to cars, space exploration and clean energy has fueled investor enthusiasm for Tesla. But skeptics are waiting to see if Musk can fulfill his promise of producing 500,000 cars per year in 2018, or six times Tesla's 2016 production.

    Shares were down about 2 percent in after-hours trade following the results.

    The automaker's comments underscored the additional challenge of keeping up demand for its older models.

    "We have seen some impact of Model S orders as a function of people being confused" that Model 3 is the upgrade to Model S, Musk said on a conference call.

    Tesla said it had $4 billion of cash on hand as it headed into the second quarter and expects year-to-date capital expenditures to be slightly over $2 billion by the time it starts Model 3 production - within its previous targeted range of $2 billion to $2.5 billion.

    That cushion should give the company some near-term breathing room from needing to tap Wall Street for cash, said CFRA Research analyst Efraim Levy. Tesla in March raised $1.2 billion from the markets.

    Record deliveries helped Tesla boost its revenue to $2.7 billion in the quarter, but a net loss net widened to $330.3 million from $282.3 million a year earlier, largely driven by its SolarCity acquisition.

    Tesla has much riding on the Model 3, which could finally make the cash-hemorrhaging automaker profitable. But while much of the company hype has focused on the car due in July, Tesla on Wednesday made a sales pitch for its overshadowed Model S.

    Tesla is anxious that the $35,000 Model 3 - which will likely not be delivered in volume until 2018 - avoids cannibalizing the higher-margin Model S, which lists at about double the starting price.


    In its earnings release, Tesla stated that a key challenge for the company would be to eliminate misperceptions about the differences between the Model S and the Model 3.

    "We want to be super clear that Model 3 is not version three of our car. Model 3 is essentially a smaller, more affordable version of the Model S with fewer features," Musk said on a conference call, adding buyers erroneously thought the Model 3 would be more advanced.

    "The Model S will be better than Model 3," he added. "As it should be, as it's a more expensive car."

    Tesla needs to ramp up for a deluge of Model 3 customers, and the company said it would be adding nearly 100 retail, delivery and service locations worldwide, representing a 30 percent increase. Tesla also said it was also working to improve efficiency, citing vehicle repair times that have fallen by 35 percent due to the use of remote diagnostics.

    The company reiterated its forecast of delivering 47,000-50,000 Model S and Model X cars in the first half of 2017, a target it announced earlier this year.

    Still, customer deposits fell 7 percent in the quarter, which could suggest interest in Tesla's current product line, the Model S and Model X, is decreasing.

    On a per-share basis, Tesla's net loss narrowed to $2.04 from $2.13.

    Excluding items, the company lost $1.33 per share. Analysts on average had expected a loss of 81 cents per share, according to Thomson Reuters I/B/E/S.

    Tesla's results reflect the first full quarter that includes solar panel installer SolarCity, which it bought last year.

    The Silicon Valley-based automaker last month became the most valuable U.S. carmaker by market capitalization, pulling ahead of Detroit's auto heavyweights Ford Motor Co (F.N) and General Motors Co (GM.N).

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    Record $7.5bn Aus renewables spend puts RET well within reach

    The latest data from the Clean Energy Council and the Clean Energy Regulator confirm that Australia is experiencing its biggest ever investment spree in large scale renewable energy, and the 2020 renewable energy target, once considered impossible to meet, is now well within reach.

    The CEC on Wednesday released new figures that put the value of large scale wind and solar projects, and one solitary biomass plant, beginning construction in 2017 at $7.5 billion.

    The tally, spread evenly around the country, with the exception of Western Australia and Tasmania, represents 3,549MW, with large scale solar overtaking large scale wind, and will result in the creation of 4,105 jobs during the building phase.

    More than $2 billion worth of these renewable energy projects have attracted financial commitment in just the last three months, boosted by a string of large-scale solar project announcements since February as solar costs challenge wind energy.

    “Large-scale renewable energy, combined with the continued strong uptake of rooftop solar and emergence of energy storage, provides a clear pathway for Australia’s future energy needs,” CEC chief executive Kane Thornton said, adding that new generation was necessary to ensure energy security as coal plants such as Hazelwood retired.

    The Clean Energy Regulator also released its own data, which shows that the surge in project announcement, particularly in the more quickly-constructed solar plants, means that the 2020 target is likely to be reached – and a long predicted deficit in large scale certificates in 2018 may also be averted.

    The pace is so great that according to executive general manager Mark Williamson, enough projects could be committed by the end of this year to meet the 2020 target – that will be one year earlier than anticipated. Already, 3,300MW has been committed in the last 15 months, and most of it in the last six to eight months and there was a huge pipeline ahead.

    The main cause is the push to solar, which is falling in costs and can be built faster. The use of single axis tracking is also increasing its output from around 25 per cent capacity to more than 30 per cent capacity.

    “The momentum we saw in the second half of 2016 has continued into 2017. Already we have one-third of the total build required for 2017 achieved in the first four months of the year. If we continue like that, we will get enough commitments by the end of the year. And our market information is that there are some big announcements coming in the net few months.

    “This demonstrates that Australia is now in a strong position to meet the 2020 Renewable Energy Target,” Williamson said. To which Wayne Smith, from the Australian Solar Council retorted: “Perhaps we should go back to the original RET target of 41,000GWh.” The target was cut under the Abbott administration.

    The fact that the target will likely be met means the current high price of large scale generation (LGC) certificates will fall from their current levels above $80/MWh, a level that has attracted huge interest in the Australian market from international players. Already, it is down to around $76/MWh

    Even though the target will largely depend on the action of the major players in the market, particularly the retailers, it suggests the market is doing  its job.

    The shortage of projects was reflected in the high price, and that has provided a signal for more projects. Hence the target was met. Most project developers would have preferred a more stable policy environment, given the investment drought caused by the uncertainty of the RET under the Abbott government.

    Solar is the big focus of development, Of the 98 new power plants above 100kW that were accredited in 2016, 86 were solar, which federal energy minister Josh Frydenberg said reflects the rapidly declining cost and increased capacity of solar PV.

    Australia’s energy market is undergoing an unprecedented and unstoppable transformation,” Frydenberg wrote in an article for the Australian Financial Review.

    “What is remarkable is the how fast the cost of these new technologies are coming down.” He described this as “good news” and said the technology could be successfully integrated with the right planning.

    The CEC, meanwhile, says that there are 35 projects that are already under construction, will start construction or have been completed in 2017.

    “Large-scale solar technology has approximately halved in price over just the last few years, making it competitive not only with wind power but with fossil fuels such as gas,” Thornton said.

    “Renewable energy is now the cheapest kind of power generation it is possible to build today, and solar power plants have a relatively short project lead time compared to other technologies.

    “Regional New South Wales and Queensland in particular will enjoy some of the biggest job and investment benefits, while the Victorian Government’s state target is expected to drive more project activity once finalised and legislated.

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    Designed for defence, renewable-energy buoy makes waves at OTC

    Ocean Power Technologies parked its wave-powered buoy outside the Offshore Technology Conference that began May 1, 2017. (Collin Eaton)

    Somewhere off the coast of Japan, a 40-foot buoy is bobbing and weaving in the ocean, dancing with the waves to generate its own electricity.

    As it slowly gyrates, a floating platform heaves up and down the tall stalk, rotating an internal power generator that can feed up to 150 kilowatt hours of electric power into a large battery, which can charge an autonomous underwater vehicle like a Tesla charging station refuels a car.

    Its owner, New Jersey-based Ocean Power Technologies, parked an identical giant yellow buoy just outside the NRG Center in Houston this week, hoping to strike up business with oil companies at the Offshore Technology Conference.

    Before it found its way to Houston, the U.S. Navy had deployed the buoy half a dozen times off the coast of New Jersey, in tests designed to extend the range of its coastal surveillance. The buoy powered high-frequency radar and sonar technology that probes the ocean for hidden vessels, on the ocean’s surface and below it.

    “Unmanned underwater vehicles can be armed with bad stuff, and could be sent 50 miles away from the U.S. coast with no way to detect them,” said Mike Mekhiche, executive vice president at Ocean Power Technologies. “You could deploy this thing (the buoy) 200 miles offshore, put all kinds of sensors on it, and have a cost-effective surveillance means to detect vehicles we can’t detect today.”

    The U.S. Navy funded the first iteration of the buoy in 2009. The idea was that the radar and sonar sensors would collect data off the coast of New Jersey and send it to onshore stations. In theory, it could spot things like narco-submarines, narcotics-filled vessels that typically travel from South America.

    Now, the renewable energy company is trying to commercialize the technology. The buoy could, for example, power subsea oil and gas equipment for three years without requiring any maintenance, or recharge AUVs — essentially, underwater drones — that monitor deep-sea drilling operations, Mekhiche said.
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    First Solar posts surprise profit on lower costs, project sale

    First Solar Inc, the largest U.S. solar equipment manufacturer, posted a surprise profit, helped by the sale of the Moapa project and cost-cutting.

    Shares of the company, which also raised its full-year revenue forecast, rose 6.7 percent in extended trading on Tuesday.

    First Solar also said it expected a larger adjusted profit, citing increased visibility into some upcoming project sales.

    The company said in March it sold the 250-megawatt Moapa project, located northeast of Las Vegas, to global private asset manager Capital Dynamics.

    Total operating expenses fell 5.6 percent to $92.2 million in the first quarter ended March 31.

    The company said it expects full-year revenue of $2.85 billion-$2.95 billion, slightly above its previous forecast of $2.8 billion-$2.9 billion.

    First Solar said it now sees adjusted profit between 25-75 cents per share, well above its previous forecast of breakeven to 50 cents.

    The company's net profit slumped to $9.1 million, or 9 cents per share, in the first quarter from $195.6 million, or $1.90 per share, a year earlier.

    The latest quarter was hurt by pre-tax restructuring and asset impairment charges of $20 million.

    First Solar said in November it would cut about 27 percent of its workforce and transition to a new product ahead of schedule.

    The company is bringing forward production of its Series 6 modules by a year to 2018 and abandoning plans for the Series 5 product. First Solar originally expected the Series 5 and 6 products to be on the market at the same time.

    Excluding items, the company earned 25 cents per share.

    Analysts on average had estimated a loss of 13 cents per share, according to Thomson Reuters I/B/E/S.

    The company said net sales rose to $891.8 million from $876.1 million, handily beating analysts' estimate of $667.8 million.
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    Argentina says lithium output to grow to 145,000 tonnes by 2022

    Lithium production in Argentina is on track to reach 145,000 tonnes in 2022 from 29,000 tonnes produced in 2016 thanks to new investment plans, the Energy and Mining Ministry said in a report on Tuesday.

    Argentina is the world's No. 3 producer of lithium, a hotly demanded material used in car batteries and mobile phones. The country currently produces around 16 percent of global output.

    "There are several projects at different stages of progress that could be operating in the next five years," the ministry said in the report. It said the investments total $1.5 billion.

    The report included a chart that projected production of more than 145,000 tonnes of lithium in 2022.

    Investments listed in the report included the construction of a 50,000-tonne capacity plant at the Cauchari salt mine in the northern province of Jujuy by Lithium Americas Corp .

    It also mentioned projects planned by Galaxy Resources Ltd and French company Eramet SA.

    Miners Enirgi Group Corporation and Orocobre Ltd will expand their production of lithium in Argentina with investments of $720 million and $160 million, respectively, Argentina's government said last month.
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    India adds record wind power capacity

    The Indian Government said it has set another record in the amount of wind capacity installed over the last year.

    The Ministry of New and Renewable Energy added more than 5,4000MW in 2016/17, surpassing its target of 4,000MW.

    It was also more than the 3,423MW of capacity added the previous year.

    The leading states were Andhra Pradesh, with 2,190MW, Gujarat (1,275MW) and Karnataka (882MW).

    They were followed by Madhya Pradesh, Rajasthan and Tamil Nadu, with 375MW, 288MW and 262MW added respectively.

    Madhya Pradesh recently signed an agreement for a solar power project with a record low tariff.

    The International Energy Agency said India, China and the US led the 75GW wave of new solar additions last year.
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    Uranium – U.S. DOE reduces amount brought to market, brings total supply reduction to 4.8% with Kazatomprom

    Below is a comment from Cantor Fitzgerald regarding the reduction of uranium dispersed into the market. This is a very positive development,and together with the cut of uranium supply by Kazatomprom, the uranium supply to the market will be reduced by 7.6 Mio. pounds U3O8 or 4.8% beginning in early 2017.

    Event: The U.S. Department of Energy (“DOE”) has released a Secretarial Determination that notably reduces the maximum amount of uranium that can be transferred to contractors for cleanup services at the Portsmouth Gaseous Diffusion Plant.

    Bottom line: Very Positive. The development is positive to the uranium sector as it reduces the amount of uranium that was being dispersed into the market by the U.S. DOE. The 2M lbs U3O8 equivalent for the remainder of 2017 and 3.1M lbs U3O8equivalent for 2018, are notably less than the 5.5M lbs U3O8 equivalent that was occurring in prior years. This is effectively an annual cut of 2.4M lbs from the market for the next two years, which is about half of the annual amount cut by Kazatomprom when it announced production reductions earlier this year of about 5.2M lbs U3O8. That announcement spurred a rally in the uranium spot price from US$20.25/lb to a peak of US$26.00/lb, or by 28%. We believe this announcement should provide a boost to the sector.

    ·        The U.S. DOE released a Secretarial Determination for the Sale or Transfer of Uranium that stipulated maximums of 800 MTU of UF6 for the remainder of 2017 and 1,200 MTU for 2018. In prior years the maximums were set at 2,100 MTU.

    ·        This translates into about 2M lbs and 3.1 M lbs of U3O8 equivalent for those years. With the prior maximum equating to 5.5M lbs U3O8 equivalent.

    ·        The transfers were to contractors in payment for cleanup services at the Portsmouth Gaseous Diffusion Plant. The maximum amount was always transferred in the past and many industry participants believed that these transfers had an adverse impact on the market as it increased spot supply.

    ·        Compared to the announcement of a 10% annual supply cut from Kazatomprom earlier this year (~5.2M lbs U3O8), the announcement by the U.S. DOE that translates into an effective annual reduction of 2.4M lbs of U3O8 equivalent is 46% of the size.

    ·        The announcement by Kazatomprom sparked a spot uranium price rally from US$20.25/lb to a peak of US$26.00/lb, or by 28%. Uranium equities across the board experienced large gains during the same period.

    ·        Combined, the Kazakh and U.S. DOE cuts amount to 7.6M lbs of U3O8equivalent, which is 4.8% of our forecast production at the beginning of 2017.

    ·        Our latest supply and demand forecast under a steady state US$40/lb U3O8scenario is show below. This forecast projects likely shutdowns and production curtailments if realized prices are flat-lined at US$40/lb.
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    Uranium producer Cameco posts loss vs year-ago profit

    Cameco Corp , the world's second-biggest uranium producer, posted a bigger-than-expected quarterly loss, partly hurt by the termination of a contract by Tokyo Electric Power Co, operator of Japan's wrecked Fukushima nuclear plant.

    The Canadian company said its results were also hurt by weak uranium prices amid a prolonged glut.

    Spot prices of uranium, used to fuel nuclear reactors, dipped to a 13-year low late last year and have rebounded only modestly in 2017.

    Cameco said severance costs and a strengthening Canadian dollar also weighed on its first-quarter results.

    The net loss attributable to Cameco's equity holders was C$18 million ($13 million), or 5 Canadian cents per share, in the first quarter ended March 31, compared with a profit of C$78 million, or 20 Canadian cents per share, a year earlier.

    Excluding items, the company lost 7 Canadian cents per share, bigger than the average analyst estimate of 1 Canadian cent, according to Thomson Reuters I/B/E/S.

    Revenue at the Saskatoon, Saskatchewan-based company fell nearly 4 percent to C$393 million, with declines stemmed by high revenue from its Nukem unit, which is a nuclear fuel broker.

    Analysts had expected revenue of C$372.345 million.
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    China Nuclear Power 2016 net profit up 14.06pct on year

    China National Nuclear Power Co., Ltd saw its net profit increase 14.06% from the preceding year to 8.11 billion yuan ($1.18 billion) in 2016, announced the company in its annual report late April 26.

    Over half of the total net profit, 4.49 billion yuan, was attributed to shareholders during the same period, gaining 18.71% from the year prior.

    In 2016, CNNP achieved 30.01 billion yuan turnover, up 14.53% from the preceding year, the company also said.

    The total assets of CNNP amounted to 282.05 billion yuan in 2016, up 7.15% from the beginning the year; the gross liability was up to 210.32 billion yuan, 6.28% from the start of 2016; asset-liability ratio was at 74.57% by end-2016; the stockholders' equity stood at 40.68 billion yuan, 8.20% higher than the start of the year.

    A total of 16 nuclear power units of CNNP generated 87.03 TWh of electricity last year, growing 17.18% from 74.27 TWh in 2015; on-grid power stood at 80.99 TWh, up 17.05% from the preceding year of 69.19 TWh.

    In 2016, the installed power capacity of the company stood at 13.25 GW, with 1.74 GW added that year; some nuclear projects were under approval and construction, with expected installed capacity of 10.38 GW, showed data from the report.

    The annual utilization time stood at 7,371.5 hours last year, 212.5 hours less than 7,584 hours in 2015, due to frequent maintenances.
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    ChemChina clinches $43 billion takeover of Syngenta

    ChemChina's has won more than enough support from Syngenta shareholders to clinch its $43 billion takeover of the Swiss pesticides and seeds group, the two companies said on Friday.

    "At the end of the main offer period on May 4, based on preliminary numbers, around 80.7 percent of shares have been tendered. Subject to confirmation in the definitive notice of interim results scheduled for May 10, the minimum acceptance rate condition of 67 percent of issued Syngenta shares has been met," they said in a joint statement.

    The agreed offer is for $465 per share. Syngenta shares closed on Thursday at 459 Swiss francs.
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    Fertilizer maker CF Industries' profit beats estimates

    U.S. nitrogen fertilizer producer CF Industries Holdings Inc (CF.N) reported a better-than-expected adjusted profit on Wednesday, as higher production offset lower fertilizer prices.

    The Deerfield, Illinois-based company's shares rose about 4 percent to $26.50 in after-hours trading on the New York Stock Exchange.

    "Strong early season demand for ammonia and urea ammonium nitrate (UAN) in the Southern Plains and lower Midwest," led to higher sales volumes in the first quarter ended March 31, the company said.

    Total sales volume by product tons of ammonia rose to 920,000 in the quarter from 737,000, while that of urea increased to 958,000 from 919,000.

    Fertilizer prices have faced pressure from weakening U.S. farmer incomes. The average selling price for ammonia fell about 18 percent to $307 per ton, while urea's decreased to $248 per ton from $256 a year earlier.

    Net loss attributable to shareholders was $23 million, or 10 cents per share, compared with a profit of $26 million, or 11 cents per share, in the year-earlier period.

    Excluding items, CF earned 5 cents per share, beating the average analyst estimate of 2 cents, according to Thomson Reuters I/B/E/S.

    Net sales rose marginally to $1.04 billion from $1 billion.

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    Bunge profit slumps on weak agribusiness margins

    U.S. agricultural trader Bunge Ltd (BG.N) reported a fall in its first-quarter profit as weak demand from South America weighed on margins in its agribusiness.

    Earnings before interest and tax in Bunge's agribusiness segment — which makes money buying, selling, storing, processing and transporting crops around the world — fell more than 61 percent to $109 million.

    Low grain prices and abundant global grain stocks have eroded margins for agribusinesses including Bunge and rivals Archer Daniels Midland Co (ADM.N), Cargill Inc [CARG.UL] and Louis Dreyfus Corp [LOUDR.UL].

    The companies, collectively known as the ABCDs, dominate the global grain trading business.

    "The slow pace of farmer selling in South America compressed margins in agribusiness and led to a lower-than-expected first quarter," Bunge's Chief Executive Soren Schroder said in a statement.

    However, the company said it expects "solid earnings growth" this year.

    Farmers in Brazil and Argentina are harvesting bumper corn and soybean crops this year, in contrast to 2016, when weather-reduced South American crops prompted farmers to hold back.

    Net income available to Bunge's shareholders fell to $39 million, or 27 cents per share, in the first quarter ended March 31, from $222 million, or $1.54 per share, a year earlier.

    On a per share basis, profit from continuing operations was 31 cents in the latest reported quarter, down from $1.60 per share, a year ago.
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    K+S officially opens $4.6bn Saskatchewan mine, renames it ‘Bethune’

    Germany's K+S Potash Canada has opened its $4.6-billion new Legacy potash mine, in Saskatchewan, marking the handover of the mine to the operations team.

    The company stated on Tuesday that the five-year construction phase was successfully completed and the first tonne of marketable potash was expected to be produced in June, as planned.

    “We’re delighted to welcome a very good corporate citizen, K+S, back to Saskatchewan as it begins operations at a mine that will create more than 400 permanent jobs and generate taxes and royalties for years to come. The Legacy projectstrengthens Saskatchewan’s position as the world’s leading potash producer and is another indicator the province’s diversified and resilient economy is weathering economic uncertainty,” Premier Brad Wall said on Tuesday during a ceremony to mark the occasion.

    The new potash mine, which ran under the project name Legacy, also on Tuesday received its new name ‘Bethune’, K+S said, continuing the Saskatchewan potash mining tradition of naming its facility after the closest neighbouring town. The project was the single largest project in the company’s history and will create about 400 permanent jobs.

    "With our new location, we are making a huge step forward in the internationalisation of our potash business. Bethune enables us to participate in future market growth, reduce our average production costs and strengthen our international competitiveness, which will benefit the entire K+S Group,” K+S Aktiengesellschaft management board chairperson Norbert Steiner stated.

    Following initial production, the first potash transport by freight train will take place from the site in southern Saskatchewan to the new K+S port facility in Vancouver, from where the potash will be shipped to customers mainly in South America and Asia. K+S also expects to achieve the desired production capacity of two-million tonnes by the end of 2017.

    "Bethune is the most modern potash facility in the world and will sustainably strengthen the raw material and production base of the K+S Group, thereby opening up a long-term perspective over the time span of our German potash deposits," K+S Aktiengesellschaft supervisory board chairperson Dr Ralf Bethke added.

    Fellow Saskatchewan-focused potash majors and merger partners Potash Corporation of Saskatchewan and Agrium have recently reported cautious optimism that demand for the crop nutrient will continue to recover, following multi-year low prices last year. Agrium commented Monday that global potash shipments finished strong in 2016 and the momentum has carried forward into 2017, which has maintained relatively low supply availability. However, global potash production rates have increased and further capacity additions, such as Bethune, are expected in 2017, which could lead buyers to be cautious following the spring application season.
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    Agricultural trader ADM's first-quarter profit jumps 47 percent

    U.S. agricultural trader Archer Daniels Midland Co on Tuesday reported a 47 percent jump in first-quarter profit on higher oilseeds processing volumes and strong demand for U.S. grains and ethanol.

    Earnings stabilized from last year's weak first quarter as brisk U.S. grain exports following record corn and soybean harvests last autumn supported the company's agricultural services segment, its largest unit in terms of revenue.

    "Our year-over-year results improved as a company and in all four of our business segments during the first quarter, and we continue to be on course for a stronger 2017," Chief Executive Juan Luciano said in a press release.

    Sales in the agricultural services unit — which makes money by buying, selling, storing, shipping and trading grains and oilseeds — rose 5 percent to $6.81 billion.

    Bumper crop harvests in South America are adding to the world grain oversupply, but slow selling in Brazil has kept U.S. exports competitive in the global marketplace, benefiting the agricultural trader.

    Still, excess world grain stocks remain headwinds for ADM and rivals Bunge Ltd, Cargill Inc [CARG.UL] and Louis Dreyfus Corp [LOUDR.UL], collectively known as the ABCD companies that dominate global grain trading.

    Robust U.S. ethanol export demand benefited ADM, the country's largest producer of the corn-based biofuel, with earnings for the corn processing unit climbing 35 percent year over year. A five-fold surge in first-quarter imports by Brazil, a top producer of sugar-based ethanol, have prompted calls for import tariffs.

    Oilseeds processing profit climbed 20 percent, lifted by good softseed margins in Europe and North America and increased revenues in Asia, where ADM has expanded its stake in vegetable oils processor Wilmar International Ltd.

    ADM's total processed volumes rose 2 percent to 14.4 million metric tons in the quarter, led by oilseeds processing.

    Net profit attributable to the company rose to $339 million, or 59 cents per share, in the quarter ended March 31, from $230 million, or 39 cents a share, a year earlier.

    Excluding items, the company earned 60 cents per share, missing the analysts' average estimate by 2 cents, according to Thomson Reuters I/B/E/S.

    Revenue rose to $14.99 billion from $14.38 billion.

    U.S. agricultural trader Archer Daniels Midland Co said on Tuesday that massive global grain stocks are making it difficult to turn a profit trading grain internationally, sending its shares plummeting by their most in eight years.

    The warning highlighted a string of trading woes at ADM, which has shed several key traders and consolidated offices amid a global grains glut.

    The Chicago-based agribusiness, one of the world's top grain traders, reported a higher first-quarter profit but said the outlook for its agricultural services segment appeared weaker than it did at the beginning of the year. That segment's global trading desk suffered its third quarterly loss in the past five quarters, according to the company.

    ADM shares closed down 8.9 percent at $41.67, the biggest percentage loss since May 2009.
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    Mosaic profit misses on lower potash, phosphate prices

    U.S. fertilizer maker Mosaic Co (MOS.N) reported a smaller-than-expected quarterly profit on Tuesday, as higher sales volumes were offset by lower phosphate and potash prices.

    However, the company said it expects higher realized prices for potash and phosphate in the second quarter and earnings to improve "meaningfully".

    Based on Mosaic's volume, price and margin outlook, analysts at BMO Capital Markets expect the company to post second-quarter earnings of 20 cents to 25 cents per share. Analysts on average were expecting 30 cents, according to Thomson Reuters I/B/E/S.

    Mosaic said it expects margins to improve in its phosphates business for the rest of 2017 as the company begins to benefit from improving market conditions and completed plant maintenance.

    The company, which agreed to buy Vale SA's (VALE5.SA) fertilizer unit for about $2.5 billion in December, has been coping with a capacity glut and soft crop prices that have pushed potash and phosphate prices to multi-year lows.

    Average diammonium phosphate selling price fell 7.9 percent in the latest quarter, while average potash MOP (muriate of potash) selling price fell 16.9 percent.

    The company also said first-quarter earnings were hurt by an outage at its Esterhazy K2 potash mine in Saskatchewan and at an ammonia plant.

    Mosaic reported a net loss attributable to the company of $900,000, in the first quarter, compared with a profit of $256.8 million, a year earlier.

    On a per share basis, the company broke even in the latest quarter, compared with a 73 cents profit last year.

    Mosaic recorded a $1 million charge in the quarter, compared with a $169 million gain, a year earlier.

    Excluding items, the company earned 4 cents per share, missing analysts' average estimate of 19 cents.

    Net sales fell 5.7 percent to $1.58 billion, well below estimates of $1.67 billion.
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    Agrium swings to Q1 loss on higher costs, lower phosphate prices

    Higher natural gas prices and lower phosphate prices have driven Calgary-based Agrium to a smaller-than-expected first-quarter loss.

    The owner of the largest farming input retail distribution network in North America and which is in the process of merging with Canadian counterpart Potash Corporation of Saskatchewan to create a new $36-billion entity, reported a net loss of $11-million, or $0.08 a share, compared with net earnings of $2-million, or $0.02 a share a year earlier.

    Removing special items, Agrium reported an after-tax adjusted loss of $4-million, or $0.03 a share, beating average analyst forecasts for an adjusted loss of $0.07 a share.

    The company sold 636 000 t of potash during the period ended March, at an average of $208/t, compared with 456 000 t, at $199/t a year earlier.

    Revenues were down slightly at $2.72-billion, missing analyst expectations for $2.77-billion.

    The company said earnings were impacted in part by phosphate prices, which fell to $466/t in the quarter, compared with $589/t for the comparable quarter last year.

    Last week, PotashCorp surprised investors with a bigger-than-expected first-quarter profit of $149-million, or $0.18 a share, nearly double that $75-million, or $0.09 a share reported for the comparable period of 2016.

    Agrium noted that global potash shipments finished strong in 2016 and the momentum has carried forward into 2017, which has maintained relatively low supply availability. Global potash production rates have increased and further capacity additions are expected in 2017, which could lead buyers to be cautious following the spring application season, the company commented.
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    New U.S. potash player K+S faces warehouse squeeze

    Germany's K+S AG will crack into the U.S. fertilizer market this spring when it opens the first new western Canadian potash mine in nearly five decades.

    But the fifth-largest global potash seller faces a stiff challenge before it makes a single delivery: where to store the pink granular nutrient until farmers need it.

    The U.S. market for potash - a key type of fertilizer used to grow corn and wheat - is already dominated by Potash Corp of Saskatchewan, Agrium Inc and Mosaic. It's also saturated: potash prices are near nine-year lows.

    Not only do these market leaders have an ample supply of potash, they also boast a string of warehouses built strategically across the Midwest where they can quickly distribute their product to U.S. farmers, who have a narrow window every spring to fertilize.

    K+S, which will open its Legacy mine on Tuesday in Saskatchewan, told Reuters it is still in "planning phase" of a warehouse network with Koch Industries Inc [KCHIN.UL], which will sell K+S' potash in the United States under a marketing agreement.

    K+S spokesman Michael Wudonig added the company is confident it will find sufficient storage. Koch spokesman Rob Carlton declined to comment.

    Investors don't have a clear understanding of K+S' missing warehouse link as it opens Legacy, according to analyst Charles Neivert, who covers the fertilizer industry at Cowen.

    “How are they going to get into a U.S. market that effectively is grossly over-supplied already and isn’t growing? Where are they going to find room to put the (potash)?" Neivert asked.

    K+S' success in distributing potash has big market implications, given there is already a glut of global capacity. Even more potash from Legacy will threaten a modest price recovery seen so far this year. For a graphic, click:

    Since K+S broke ground on Legacy, U.S. potash prices have fallen roughly in half, to around $250 per ton, according to data published by BMO.

    K+S plans to sell up to 500,000 tons of potash annually in the United States, accounting for some 7 percent of U.S. demand, according to industry estimates. Legacy will also answer a longer-term supply issue K+S faces, as potash at its other mines is depleted.


    Potash Corp, Agrium and other potash players dominate the U.S. market by leveraging their own warehouses and longtime leases with others to position potash for just-in-time application by farmers.

    The alternative is relying on the 10- to 14-day railway trip for potash to move from mines in Saskatchewan to buyers in the Midwest and northern Plains.

    "Many of the large warehouses already have space consigned, so (K+S') opportunity to get placed in the large facilities could be difficult," said Gary Halvorson, vice-president of retail agronomy at U.S. farm cooperative CHS Inc.

    "That is a very key piece of supply chain," Halvorson added. "For any manufacturer of dry fertilizer, they really need to put their back into having tonnes close enough to end users."

    CHS has nearly 500 U.S. farm retail stores along with warehouse space that it leases to potash suppliers. It has not leased space to K+S, the company said.

    "That's the challenge K+S faces to break into the market," said Joe Dillier, director of supply and merchandising at Growmark, an Illinois-based farm cooperative and distributor that leases some storage space to potash miners.

    K+S partner Koch could store some of K+S' potash in its own fertilizer warehouses, and K+S has said it will take until year end to reach Legacy's full annual output pace of 2 million tonnes. Three-quarters of production will be sold to industrial users or off-shore buyers.

    Legacy is opening as farmers plan to sow less corn, a fertilizer-intensive crop, making crop nutrient sales a bigger challenge.

    To break in, Koch may need to cut prices to sway U.S. buyers, since K+S' logistics will not be as smooth as for established players, said industry consultant Kelvin Feist.

    "There is no easy way in - you have to discount the price," Feist said. "Koch is late to the party."

    Lower costs would be timely for U.S. farmers, struggling with declining incomes and used to dealing with a consolidated farm input sector, said Aaron Heley Lehman, president of Iowa Farmers Union. He welcomes the potash mine.

    "It's long overdue for our farmers to have more choice."
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    India draws up $8.7 billion plan to turn urea exporter

    India aims to become a urea exporter by 2021 as the South Asian nation has drawn up a 555 billion rupee ($8.7 billion) plan to revive mothballed fertilizer plants and set up gas import and pipeline facilities in eastern India.

    The fertilizer plants would raise annual urea production capacity by 7.5 million tonnes, fertilizer minister Ananth Kumar told a news conference on Thursday.

    India produced 24.2 million tonnes of urea in 2016-17. The country's farm sector accounts for about 15 percent of its $2 trillion economy and employ three-fifths of its 1.3 billion people.

    The country imported about 5.4 million tonnes of its fertilizer needs from countries including Iran, China and Iran during the last fiscal year ending in March.

    "From an importing country, we will become an exporting country," said Kumar. "For food security, we need fertilizer security."

    The expansion includes building a 2,650-km (1,590-mile) pipeline, the revival of four urea plants in northern Uttar Pradesh state, eastern Jharkhand, Bihar and Odisha states, and building a liquefied gas import facility all at a cost of about 500 billion rupees, oil minister Dharmendra Pradhan said during the news conference.

    A separate fertilizer project at Ramagundam in southern Indian would cost 55 billion rupees, he added.

    The fertilizer projects will get natural gas as a feedstock from Adani Group's 5 million tonne a year liquefied natural import facility at Dhamra in Odisha.

    "We have derisked the project... all the expansion will be on imported LNG," Pradhan said, adding the projects will be in operation by between 2020 and 2021.
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    Precious Metals

    Peruvian Supreme Court rules against Newmont

    Newmont Mining, the world's 2nd largest gold miner, walked away from its $5 billion Conga copper and gold project in Peru in 2016, due to relentless community opposition.

    The Supreme Court of Peru has ruled in favour of a farmer that Newmont Mining claimed was illegally occupying land it wanted to develop into the Conga mine.

    The U.S.-based gold miner appealed a decision by a lower court in 2014 that ruled in favour of potato farmer Máxima Acuña.

    Community opposition to the $5 billion copper and gold project forced Newmont to walk away from it last year.

    Acuña, who has been at the forefront of the opposition against the Conga project since it was first proposed in 2010, was awarded the Goldman Environmental Prize.

    Newmont decided to halt construction work at the project in November 2011, after violent protests led by governor Gregorio Santos forced the country's government to declare a state of emergency.

    Minera Yanacocha, one of the two local companies working with Newmont on the now mothballed project, tried hard to win local support, but was unable to secure it.

    "I feel happy and relieved that here in the capital [the court] has also provided justice," Acuña said after the Supreme Court decision. Reuters reported Acuña saying her home was destroyed during the mine's construction. Minera Yanacocha took her to court for "usurping" its land.

    Output from Conga was supposed to replace production from the nearby Yanacocha mine, which is running out of gold.
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    Central bank gold demand slides to near six-year low in first-quarter: WGC

    Central bank gold demand hit its lowest in nearly six years in the first quarter as Chinese buying dried up, the World Gold Council said in a report on Thursday, feeding into an 18 percent year-on-year drop in overall demand.

    The official sector added just 76 tonnes of bullion to its holdings in that period, the industry-funded WGC said in its latest Gold Demand Trends report, down by more than a quarter from a year before and the lowest of any quarter since Q2 2011.

    China, a major official sector buyer of gold in recent years, has held off making any additions to its reserves since October, the first time it has done so since it started releasing quarterly reserves data in 2015.

    A focus on capital outflows may have been weighing on the Chine2se central bank's interest in gold, the WGC's head of market intelligence Alistair Hewitt said.

    "China's forex reserves have declined significantly over the last 18 months, edging beneath $3 trillion at the start of this year," he said. "At the same time gold as a percentage of FX reserves has increased. That is partly a function of the decline in FX reserves and also the increase in the gold price."

    The WGC is forecasting central bank purchases of 250-350 tonnes this year, he said, down from 377 tonnes in 2016. Russia and Kazakhstan are expected to remain buyers of gold.

    The first-quarter drop in central bank buying fed into an 18 percent fall in global gold demand to 1,034.5 tonnes, the weakest first quarter since 2010, the WGC said.

    Investment in gold-backed ETFs slipped back from the previous year's record levels, though it held firm at 109 tonnes, versus selling of 193 tonnes in the previous quarter.

    Balancing that, global jewelry consumption, the single largest demand segment, was a touch higher, while coin and bar demand rose 9 percent.

    Chinese consumer demand edged up 8 percent to 297.3 tonnes as higher coin and bar demand offset softer jewelry offtake, while Indian demand also rose 15 percent to 123.5 tonnes as the impact of demonetization eased, releasing pent-up demand.

    Chinese demand is forecast to reach 900-1,000 tonnes this year, against 913 tonnes last year, while Indian consumption is forecast at 650-750 tonnes, against 660 tonnes in 2016, the WGC said.
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    Base Metals

    Indonesia and U.S. miner Freeport start contract negotiations

    Indonesian authorities on Thursday kicked off negotiations with Freeport McMoran Inc. over a contract dispute that has prompted the U.S. mining giant to scale down operations in the eastern province of Papua.

    CEO Richard Adkerson met with mining ministry officials in Jakarta to start talks over a range of disagreements including legal assurances over investments beyond 2021, tax rates, and a government requirement for Freeport to divest a 51 percent stake in its local operations.

    "We have work to do, issues to discuss, but we're all going in this with goodwill and optimism about reaching a win-win situation," Adkerson told reporters after meeting with mining minister Ignasius Jonan and other officials from the central and Papua provincial government.

    "For Freeport, the key issue is having assurance about our ability to operate," he added.

    Teguh Pamuji, secretary general at the mining ministry, said the negotiations would focus on fiscal certainty, taxes and royalties, divestments, and the development of smelters.

    The dispute arose after Indonesia revised its mining rules in January, which brought Freeport’s copper concentrate exports to a halt and led to the company scaling back operations and temporarily laying off thousands of workers in the impoverished Papua province.

    To comply with the new rules, Freeport and other miners are required to convert their original contracts of work to a special contract. Freeport, which argues this requirement and others violate its existing contract, has threatened arbitration.

    But both sides have recently softened their tone, saying instead that arbitration is a last resort.

    "So long as we're progressing to (a) ... mutually acceptable resolution, there would be no arbitration," Adkerson said.

    Freeport was last month granted an export permit valid until February 2018, allowing it to resume export shipments until at least October 2017, pending further negotiations. The move came after U.S. Vice President Mike Pence visited the Southeast Asian nation.

    A Freeport workers' union started a month-long strike on May 1 aimed at ending the company's layoffs and furlough policy.
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    Congo Q1 copper production jumps 25% y/y – central bank

    Copper output in Democratic Republic of Congo, Africa's top producer, hit 274 316 t in the first quarter of 2017, a 25% increase over the 219 009 t produced in the same period last year, the central bank said on Wednesday.

    The output represents a rebound after production in the first quarter last year dipped 20% due to low global prices.
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    Nyrstar invests in mines to make them attractive to buyers

    Belgian zinc producer Nyrstarsaid it was committed to pulling out of mining and added it would make small investments to improve its remaining mines in North America and make them more attractive to a potential buyer.

    Nyrstar entered mining in 2009 to secure supply of raw materials but a string of operational issues led to the division making a loss and the company decided to sell its mines.

    In the first quarter of 2017, Nyrstar's remaining mines in North America made a small core profit of €3-million ($3.3-million).

    "Nyrstar . . . will continue to utilise limited additional capex to prove up reserves and strengthen mine plans to facilitate sales of its remaining North American mining asset base," the company said.

    After agreeing to sell all of its Latin American operations, the group still owns mining assets in the US and Canada.

    For the company as a whole, core profit in the first quarter increased by about a third from last year to €55-million, boosted by its zinc smelting business which benefited from higher commodity prices and a stronger dollar.
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    Idled New Madrid aluminium smelter targeted for partial restart late this year

    Switzerland-based ARG International AG is working to get one potline back in production this fall at the long-idled, 263,000 mt/year New Madrid primary aluminium smelter, which has been renamed Magnitude 7 Metals, in southeastern Missouri, a spokesman for the smelter said Wednesday.

    Donnie Brittain, who was employed by Noranda Aluminum, the smelter's former owner, for 30 years before the smelter closed in March 2016, said in an interview that ARG officials are negotiating an agreement with Ameren Missouri to buy 175-180 MW of around-the-clock power to supply one potline.

    Ameren Missouri, a subsidiary of St. Louis-based Ameren, supplied New Madrid for years. Magnitude 7 Metals also is in discussions with Associated Electric Cooperative, a generation and transmission cooperative located in Springfield, Missouri.

    New Madrid city administrator Richard McGill said in an interview Wednesday that the community supports the efforts of Magnitude 7 Metals.

    "We don't have a power agreement yet," Brittain said. "We're in negotiations right now. Our plan is to get something producing in the fourth quarter of 2017" at the smelter that provided hundreds of good-paying jobs for decades in the New Madrid area.

    Noranda shut the smelter shortly after the Franklin, Tennessee-based company filed for Chapter 11 bankruptcy reorganization February 8, 2016.

    During its time in bankruptcy, Noranda sold off its major assets, including the smelter, three rolling mills in Tennessee, Arkansas and North Carolina and its 1.2 million mt/year Gramercy alumina refinery in Louisiana.

    Matt Lucke, a former Glencore official who formed ARG, was successful in a court-sanctioned auction for the smelter last year with a high bid of $13.7 million. The deal closed October 28.

    But New Day Aluminum, a company headed by former senior management of Wise Metals, outbid ARG/Lucke for Gramercy with a winning offer of $24.43 million, just edging out ARG's $24 million bid.

    Although Brittain acknowledged ARG "failed in the process of getting the Gramercy alumina refinery," he said ARG keeps "a pretty good pulse" on the alumina market and should not have any difficulty in securing enough alumina for a partial smelter restart later this year.

    Brittain said Lucke recently lured Robert Prusak, a former Glencore executive, out of retirement to serve as president and CEO of Magnitude 7 Metals. Prusak, who previously served as chairman of the former Ormet Corp. in Ohio as well, could not be reached Wednesday for comment.

    According to Brittain, Magnitude 7 Metals -- named after a series of powerful earthquakes that shook the New Madrid area in 1811-1812 -- currently is a seven-employee company. Despite the company's optimism, the smelter's restart is not yet guaranteed. A new power arrangement at acceptable rates is crucial to any restart.

    Indeed, Noranda's inability to secure less expensive electricity for New Madrid was a key factor in the company's eventual bankruptcy.

    "We're looking to see if we have the ability to restart it with all the economic factors in line," he said. Alumina prices have fallen to just over $300/mt in recent weeks from about $360/mt earlier this year.

    Brittain said Magnitude 7 Metals would like to see aluminium prices around $1,940/mt on the London Metal Exchange before finally pulling the trigger on the smelter restart. While the smelter has been maintained since its shutdown, the restart itself would be fairly expensive, probably costing millions of dollars, he noted.

    Nevertheless, the company remain hopeful the first potline will be up and running again later this fall. If the first potline is operational this fall, the company tentatively is targeting the second quarter of 2018 for the second potline restart, he added.

    Missouri's electric market is not deregulated, but because its load was so large -- around 500 MW -- and because of its importance to southeastern Missouri, the smelter had been granted what amounted to a variance to pursue the most attractive power arrangement it could get.
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    Southern Copper profit rises 70% on higher metals prices

    Southern Copper on Wednesday reported net income of $314.4-million for the first quarter, up 70% from $185.1-million a year earlier and 82% above the $172-million posted in the fourth quarter of 2016.

    Southern Copper, owned by Grupo Mexico, is one of the world's largest copper producers and operates mines in Mexico and Peru. The increase in profit came as copper prices rose 25% and zinc prices rose 65.8%, the company said.

    A two-week strike last month at its Toquepala and Cuajone copper mines as well as its Ilo refinery in Peru reduced copper production by 1 418 t, Southern Copper said in its earnings report. The two mines together produced 310 000 t of copper last year, according to government data.

    Net sales grew 27.2% to $1.6-billion, while the cost of sales grew 16.1% to $843.8-million, Southern Copper said. The company's capital investments grew 10% to $245.6-million due to a plan to boost copper output at Toquepala by 100 000 t to 260 000 t by 2019.

    With the expansion, Southern Copper will produce one-million tonnes in 2019, compared with 900 000 t produced last year, chairperson German Larrea said.

    Attached Files
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    Copper Is Crumbling After Stockpiles Surge

    Copper Is Crumbling After Stockpiles Surge

    After reaching one month highs on Monday, copper futures prices have tumbled to near 3-week lows amid slowing China credit impulse-driven economic signals (PMIs weak) and a surge in LME stockpiles.

    And the market reacted...

    Additionally, as Bloomberg reports, There are also more signs of slack spot demand: immediate delivery copper’s discount to the three-month contract on the LME has widened 28 percent this week. Bigger inventories and the loosening of the copper price curve are at odds with forecasts that the copper market will move into deficit this year, Leon Westgate, an analyst at Levmet U.K. Ltd., said by phone.

    “Judging by the price action and the movement in the spreads, it looks like the market might have been anticipating these deliveries,” he said.

    As Guy Wolf, a London-based analyst at Marex Spectron Group, noted:

    “It is about whether the tide of liquidity is going in or out, not the latest anecdote about Chinese demand or comment from a Chilean union official.”

    “We think we’ll see a more sizable slowdown out of China,” says Edward Meir, an analyst at INTL FCStone in NY
    “We’re a little bearish on copper for May”
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    German copper group Wieland buys U.S. tube business

    German copper products group Wieland said on Wednesday it has taken over the copper and steel tube business of U.S. company Wolverine Tube Inc, as part of its plans to expand internationally.

    Unlisted Wieland gave no financial details of the deal, which will see it acquire Alabama-based Wolverine's manufacturing of finned and enhanced surface tubes from copper, copper alloys and steel alloys.

    "In line with our corporate strategy, this acquisition is another important step on the way to expand Wieland Group's international market position," Wieland CEO Erwin Mayr said in a statement. "It allows us to strengthen our portfolio of high-end, technically differentiated businesses."

    One major use of the finned and enhanced surface tubes is energy-efficient coolant transfer in large air conditioning systems for buildings, a Wieland spokeswoman said.

    The company did not give any details of the business's tonnage or turnover.

    Mayr became Wieland CEO on April 1 and has said he plans to expand the group's international presence.

    Wieland sells around 440,000 tonnes of copper products a year with annual sales of around 2.7 billion euros ($2.9 billion) and has operations in Europe, North America and Asia.
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    Philippines' congress panel rejects Lopez as environment minister

    Philippine lawmakers on Wednesday rejected the appointment of Regina Lopez as environment minister, 10 months into her term in office, confirming an earlier Reuters report.

    The Commission on Appointments moved to reject the appointment made by President Rodrigo Duterte who has largely supported Lopez's mining crackdown. Lopez was the second member of Duterte's cabinet dismissed by Congress.

    Congressman Ronaldo Zamora earlier told Reuters about the outcome of the vote, which removed Lopez.

    Lopez angered the mining sector after ordering in February the closure of more than half the country's mines and the cancellation of dozens of contracts for undeveloped mines to protect water resources. Last week, she banned open-pit mining.

    Cabinet ministers in the Philippines undergo a confirmation hearing, often long after they begin work.
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    Nickel falls from grace as bull narrative unravels

    Nickel has gone from bull hero to zero in the space of just a couple of months.

    In early March, when London nickel was trading above $11,000 per tonne, it was the best performer among the major base metals traded on the London Metal Exchange (LME).

    At a current $9,510 per tonne, it is now down 4 percent on the start of the year and vying with tin for worst performer.

    Early exuberance has run aground on the shifting sands of politics in the Philippines and Indonesia, two suppliers of nickel raw materials to China's massive stainless steel sector.

    What seemed a straightforward narrative of supply shortfall has become ever problematic in recent weeks.

    The International Nickel Study Group (INSG) is still forecasting a supply-usage deficit this year but it has just trimmed its expectations and adjusted its deficit calculation for 2016.

    Moreover, even if the INSG's assessment of a 40,000-tonne production shortfall this year proves correct, there is the not so little issue of stocks, both in LME warehouses and in China.


    The bull narrative for nickel appeared clear cut.

    Indonesia, previously the major supplier of nickel ore to nickel pig iron (NPI) producers in China, had stopped all shipments at the beginning of 2014.

    The Philippines, which emerged to fill the resulting gap, then generated a second supply shock in the form of eco-warrior turned environmental minister Regina Lopez.

    Lopez ordered the suspension or closure of almost half the country's mines, many of them nickel producers, on charges of environmental degradation.

    The impact is already showing in China's trade figures.

    Shipments of nickel ore from the Philippines drop over the October-March rainy season every year but the amount of material imported in the first quarter of this year, 2.32 million tonnes, is the lowest since 2012, when the country was still a second-tier supplier after Indonesia.

    However, just when trade flows seem to be confirming nickel's bull credentials, the narrative is starting to unravel.

    Affected nickel producers in the Philippines are fighting back, both legally and politically, and Lopez' future is far from certain with a showdown looming in the form of the firebrand's Senate confirmation hearing on Wednesday.

    Events in the Philippines, though, have been overtaken by those in Indonesia.

    Because Indonesia has part reversed its ban on ore shipments by allowing some producers, first and foremost Aneka Tambang , to export stocks of nickel ore.

    There was a suggestion that shipments had already resumed but the 300,000 tonnes of Indonesian ore that apparently landed in China in January and February seems to have been a misclassification by the Chinese customs authorities.

    Not so with the 50,800 tonnes of ore that has just arrived at the Chinese port of Lianyungang in the province of Jiangsu, according to local specialist news service Shanghai Metals Market. The shipment, made by Zhenshi Holding Group, is the first official arrival of Indonesian ore since the January 2014 ban, according to SMM.

    More will come.

    Aneka Tambang is sitting on over five million tonnes of nickel ore and has just applied for an export license for an additional 3.7 million tonnes over and above the 2.7 million that have already been approved for export.

    Remember that these exports will supplement the ever-growing amount of nickel pig iron that is now being exported from Indonesia to China thanks to the build-out of processing capacity in the country.

    That was, after all, the purpose of the original ban, and the resulting flow of interim product continues to increase, more than doubling to 232,000 tonnes in the first quarter.


    Given such startling shifts and turns in the raw materials story, pity the statisticians at the INSG who have to try and weave a coherent overview of what is happening in the nickel market.

    The Group has just issued its latest assessments, tweaking the production side of the balance sheet higher.

    As a result, the supply deficits of 67,000 tonnes and 66,000 tonnes calculated for 2016 and 2017 at the time of its last meeting in October have been trimmed to 38,000 and 40,000 tonnes respectively.

    Whichever figure you want to take, these calculated deficits are small relative to the size of global nickel stocks.

    The amount of nickel sitting in the LME warehouse network currently stands at 379,182 tonnes. Last year's downtrend, which saw inventory fall by 69,000 tonnes, has dissipated. Indeed, LME stocks are now up by over 7,000 tonnes on the start of the year.

    It is true that those registered with the Shanghai Futures Exchange have declined by almost 9,600 tonnes to 84,334 tonnes.

    But the ebb and flow between London and Shanghai stocks seems to reflect little more than the shifting arbitrage between the two markets.

    Taken in the round, total visible stocks at a current 463,500 tonnes are largely unchanged on the start of the year.

    There may, moreover, be a significant amount of legacy stock sitting in the statistical shadows beyond the reporting reach of the exchanges.


    Nickel's bull story was all about the supply of ore to China and hence dependent on a continued Indonesian ban and a mass shutdown of mining capacity in the Philippines.

    With Indonesia now effecting a partial about-turn in export policy and the state of Philippine play still highly uncertain, a previously straightforward narrative has become increasingly complicated.

    But the real problem for nickel bulls may have been the collective focus on just one strand in the supply chain.

    The more collective hopes were pinned on the disruption of nickel ore as a determinant of future price, the less incentive anyone else had to trim production during the long price decline that took place between 2011 and 2016.

    Nickel, it turned out, was surprisingly price inelastic and that, as much as the vagaries of ore supply politics, may yet turn out to be the real hindrance to higher prices.

    Whatever the statistical niceties of this year's supply-demand balance, the final figure is still going to be dwarfed by the amount of stocks accumulated over the last few years.
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    Indonesian miner Antam to resume nickel ore exports this month

    Indonesia's state-controlled miner PT Aneka Tambang (Antam) will resume exports of nickel ore this month, with an initial shipment of 150,000 tonnes expected to leave for China in early May, a company executive said on Tuesday.

    The nickel shipment in May will be Antam's first after a three-year halt due to a government ban on raw mineral exports imposed in early 2014.

    Antam, which has 5 million tonnes of low-grade wet nickel ore available for immediate shipping, also requested on Tuesday permission from the mining ministry to export an additional 3.7 million tonnes of nickel ore over the next year.

    The company has already received official approval to export 2.7 million tonnes of nickel ore over the 12 months from end-March, all of which will be bound for China, one of the world's biggest consumers of the metal.

    "The first shipment of three vessels is being loaded right now," Antam director Hari Widjajanto told reporters.

    "We hope it will leave in early May," he said.

    Antam is planning to ramp up production from last year's 1.63 million tonnes to 9 million tonnes in 2017, Widjajanto said.

    Since the government announced plans to roll back its ban on mineral exports on Jan. 12, nickel prices on the London Metal Exchange are down roughly 10 percent or just over $1,000 a tonne.

    The ban on raw mineral exports was imposed in 2014 to encourage investment in value-added smelting projects but the restriction hurt miners like Antam and government revenues.

    The government missed its 2016 revenue target by $17.6 billion, according to unaudited budget data from the finance ministry.
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    Alcoa to restart Lake Charles, Louisiana, petcoke calciner in June: spokesman

    US aluminium producer Alcoa is finishing repair work on a rotary kiln at its Lake Charles, Louisiana, petroleum coke calciner, with the aim of restarting the facility in June for what would be the first time in almost 18 months, a spokesman for Alcoa said Monday.

    Alcoa spokesman Jim Beck said by email the facility would start processing green petroleum coke in June and supply some of the company's aluminium smelters with calcined petcoke, which they in turn use to make carbon anodes, used as a carbon source in the aluminium smelting process. But Alcoa's carbon anode facility in Lake Charles will remain idled, Beck said.

    The rotary kiln at the Lake Charles calciner failed on December 25, 2015. In January 2016, Alcoa said calcining operations at the plant were likely to be offline for at least five months.

    At the time of the outage, the calciner produced about 250,000 mt/year of CPC for Alcoa's smelters, and sourced green coke from various oil refineries.

    Over the last few months, Alcoa has reportedly been buying green petcoke in preparation for the restart, according to market sources.
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    Sherritt surrenders equity share at Ambatovy to cut $1.4B in debt

    Canada-based nickel miner Sherritt has struck a deal with its partners at the Ambatovy nickel operation in Madagascar, allowing the company to eliminate $1.4 billion in debt.

    In a news release, the Toronto-based firm said it will reduce its stake in the joint venture from 40% to 12%, and remain the mine operator. The nickel-cobalt mine and processing facilities are expected to run until 2024.

    "After months of negotiation, I am pleased to be able to announce a resolution which removes the largest area of uncertainty for both Ambatovy and Sherritt. With this transaction, we eliminate $1.4 billion in debt from Sherritt's balance sheet, and maintain our exposure to Ambatovy with a clean 12 per cent interest and continuity as the operator," CEO David Pathe said in a statement.

    Sherritt didn't say what the mine's new ownership structure would look like, but previously Sumitomo Corp. owned 32.5% and Korea Resources Corp (Kores) had a 27.5% stake.

    In February Sherritt revealed it was looking at exiting Ambatovy  – a mine it spent 90% of the $5.5 billion it cost to develop, with its Asian partners – in an effort to relieve a crushing debtload that had caused red ink to spill.

    To build the mine, Sherritt had to borrow US$650 million from its Korean and Japanese partners, to pay for its 40% share of what is the world's biggest nickel mine, with the capacity to produce 60,000 tonnes of nickel and 5,600 of cobalt a year.

    Sherritt, which also owns oil and gas operations in Cuba and mines cobalt and nickel on the island through its Moa joint venture, reported a net loss of $378.9-million for 2016. 2015 was quite a bit worse, with a net loss of $2.1 billion largely due to a $1.6-billion writedown on Ambatovy.

    The company's stock actually gained 1.11%  on the news, to close at 91 cents in Toronto.
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    Bougainville region lifts decades-old ban on new mining

    A mineral-rich region of Papua New Guinea has lifted a 40-year-old ban on new mining and exploration, opening the way for iron ore and copper operations.

    The autonomous Bougainville region has a troubled history over resource development, with a bloody secessionist conflict erupting in the late 1980s stoked by dissatisfaction in how benefits from the Panguna copper mine were distributed.

    Global mining giant Rio Tinto Ltd said last year that it would relinquish ownership of Panguna, closed for around 25 years.

    The lifting of the ban allows for applications to mine in the iron ore rich areas of Tore, Isina and Jaba, but does not include Panguna, one of the largest copper mines in the world, Bougainville president John Momis said in a statement on Sunday.

    He added that scrapping the ban would ensure the area's economic development, with the government seeking applications from genuine investors.

    "I look forward to the development of long term economic partnerships to allow Bougainville to fulfill the economic potential she rightly deserves," Momis said.

    The moratorium on exploration and mining had been in place since 1971 - with the exception of Panguna - due to local concerns over revenue-sharing and the impact on the environment.
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    Norway's Hydro ups 2017 aluminium demand growth forecast to 4-6%

    Norsk Hydro is raising its aluminium demand growth forecast for this year, the Norwegian producer said Friday.

    "We are raising our expected 2017 global primary demand growth outlook from 3-5% to 4-6%, and we expect a largely balanced global market," said Svein Richard Brandtzaeg, the company's president and CEO, in its first-quarter results statement.

    Global primary aluminium consumption decreased 3.4% to 14.7 million mt in the first quarter compared to the fourth quarter of 2016, mainly due to seasonal effects with the Chinese New Year and customer destocking, Hydro said.

    Compared with Q1 2016, however, global demand increased 5.9%.

    Outside China, demand seasonally increased 1.9% in the first quarter from Q4 2016, while the year-on-year increase was 3.4%.

    "Consumption outside China amounted to 7.1 million mt for the first quarter of 2017. Corresponding production amounted to 6.7 million mt, a decrease of 2.3% compared to the fourth quarter of 2016," Hydro said.

    "Production outside China experienced a 0.8% increase compared to the first quarter of 2016, largely driven by ramp-up of new production capacity in India. Demand for primary aluminium outside China grew by around 3% in 2016, and is expected to grow by 2-4% in 2017," it said.

    Compared with Q4 2016, Chinese aluminium consumption fell 7.9% to 7.6 million mt, due to seasonal effects, but was up 8.3% year on year.

    "Corresponding aluminium production increased by 1.7% compared to the fourth quarter of 2016, and increased 16.6% compared to the first quarter of 2016," the company said.

    Demand for primary aluminium in China is expected to grow by around 6-8% in 2017 and production is expected to increase by 10-12%. Hydro said.

    Hydro produced 516,000 mt of primary aluminium in the first quarter, down 2% from 526,000 mt in Q4 2016 but up marginally from output of 514,000 mt in Q1 2016.

    The company has sold forward around 50% of its expected primary aluminum production for Q2 2017 at around $1,875/mt.

    Planned maintenance programs at the Paragominas and Alunorte units in Brazil reduced Hydro's bauxite and alumina production volume for the quarter, the company said.

    Alumina production was off 7% from Q4 at 1.523 million mt, but up from 1.517 million mt in Q1 2016, while bauxite output stood at 2.4 million mt, down 22% from 3.063 million mt in Q4 and down 11% from 2.682 million mt in Q1 last year.
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    Chile copper output drops 23% in March on Escondida strike: government

    Chile produced 378,261 mt of copper in March, down 23.1% from the year-ago month, as a strike at the world's largest copper mine bit into output, government data showed Friday.

    Workers at the BHP Billiton-controlled Escondida copper mine went on strike for an unprecedented 44 days in February and March in a conflict over pay and conditions, halting all production at the open pit operation. It was the longest strike in the Chilean mining industry for more than four decades.

    Unscheduled maintenance at another major mine also reduced output during the month, Chile's statistics agency INE said in a statement.

    The monthly figure marked little changed from 376,948 mt in February, which also impacted by the strike.

    Copper production during the first quarter totalled 1.208 million mt, down 14.3% Q1 2016.

    The 2,500 unionized employees of Minera Escondida agreed to return to work in late March despite not agreeing to a new contract with management, opting instead for an 18-month extension of their previous contract. The move means that the two sides will have to hold fresh negotiations on a new contract early next year.

    BHP Billiton is currently working to return the mine to its previous production levels but this is expected to take several weeks.

    Earlier this month, Rio Tinto, which owns 30% of Escondida, estimated the mine will not reach capacity levels until July this year, suggesting the strike will continue to weigh on Chilean mine output well into the second quarter.

    BHP Billiton has cuts its production forecast for the 2017 financial year to 780,000-800,000 mt, from 1.07 million mt previously.

    The loss of production at Escondida due to the strike has forced the government to reduce its outlook for Chilean copper production this year. In April, the Chilean Copper Commission cut production forecast for 2017 to less than 5.6 million mt, down from 5.8 million mt estimated in January, as the conflict at the mine lopped 180,000 mt off its previous forecast.

    Chile is the world's largest producer and exporter of copper, accounting for around 29% of global mine output last year.

    The strike has also impacted production of other metals.

    Production of gold, a byproduct at Escondida, fell 24.2% in March to 2,709 kg, compared to 12 months earlier, reflecting both the strike and the closure last year of Kinross Gold's Maricunga mine over environmental issues. Production during the first quarter totalled 8,298 kg, down 22% from 2016.

    Production of silver fell 33.1% in March to 88,945 kg, and 33.1% in the first quarter to 283,385 kg.

    Production of molybdenum, a key byproduct at several of Chile's large copper mines (but not at Escondida) rose 7.6% in March to 5,156mt, although production in the first three months of the year slipped 4.2% to 14,388mt. Given the importance of the Escondida mine to the Chilean economy, the strike has had an important impact on growth figures during the first quarter of the year.

    After GDP contracted by 1.3% in February as a result of reduced mining activity, economists surveyed by the Central Bank earlier this month forecast flat growth in March.
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    Freeport Indonesia workers hold rally at start of planned strike

    Thousands of workers from the Indonesian unit of Freeport McMoRan Inc staged a rally near its Papua mine on Monday, a union leader said, protesting against lay offs by the miner due to a contract dispute with the government.

    The union representing a third of the 32,000 workforce sent a notice to Freeport on Monday threatening to strike from May 1 to the end of the month at the Grasberg mine, the world's second-biggest copper mine.

    Freeport is trying to ramp up output and exports at Grasberg after reaching a temporary deal with the government following a 15-week stoppage linked to new mining rules, but customers are concerned that labor unrest could now hit supply.

    Freeport has laid off about 10 percent of its workforce and warned it could cut another 5,000 to stem losses, sparking protests from workers.

    "We are still waiting. We have good intention by opening up in a transparent and fair manner so the problem can be solved. We actually don't want a strike to happen," said the union leader Aser Gobai, adding that about 8,000 workers had taken part in the rally in Timika, the nearest town to the mine.

    A spokesman for Freeport Indonesia did not respond to requests for comment.

    Freeport Chief Executive Richard Adkerson said last month that the company was in talks with union leaders "in an effort to get them back to work", and warned it could punish workers for absenteeism.

    Up to $40 million-per-month of spending on the Grasberg underground development could be cut if contract matters are not resolved, which could lead to more layoffs, he said.

    Any delays in resuming exports could also support copper prices, with London Metal Exchange prices currently around $5,735 a tonne.

    Adding to tensions around Grasberg, several Freeport workers and police were injured in a clash in Papua last month, when officers fired tear gas and rubber bullets at demonstrators in Timika who authorities said had been attempting to free a union leader at a court hearing.

    New rules in Indonesia require Freeport to obtain a new mining permit, divest a 51 percent stake, build a second copper smelter, relinquish arbitration rights and pay new taxes and royalties.

    Freeport insists any new permit must have the same fiscal and legal guarantees as under its 30-year mining contract, and in February it served notice to Jakarta, saying it has the right to commence arbitration if no agreement is reached by June 17.
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    Steel, Iron Ore and Coal

    Beijing's three neighbouring cities to shut 22 Mtpa steel capacity

    Bazhou Xinli Iron and Steel Co., Ltd in Langfang city of Hebei province decided to withdraw from the market and had completely stopped production on April 26, Beijing Daily reported on May 5.

    The move, aimed at complying with China's de-capacity policy, reduced around 3 Mtpa of steelmaking capacity.

    The company has a total 3.5 Mtpa of capacity, and mainly produces strip steel and steel tube. Last year, it closed a blast furnace.

    It also signaled more efforts are to be made to slash surplus steel capacity in cities of Hebei that surround capital Beijing in the future.

    Langfang, Zhangjiakou and Baoding – Beijing's three neighboring cities – are expected to slash a total 22 Mtpa of steelmaking capacity in the near future.

    Steel capacity of the three cities amounted to 22.5 Mtpa, accounting for some 8% of Hebei's total steel capacity. Most of the steel enterprises that are to reduce capacity in these cities are private firms.
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    Liberty House's Gupta predicts no fall in China's steel capacity despite cuts

    Liberty House, the industrials and commodities group that has been buying troubled steel plants, does not expect China's net steel capacity to fall, despite Beijing's capacity cut targets.

    China produces about half the world's steel and pledged last year to cut 100-150 million tonnes of capacity by 2020, which along with infrastructure spending helped prices soar.

    The world's second largest economy cut 60 million tonnes of capacity last year and has targeted another 50 million tonnes this year, but Liberty chairman Sanjeev Gupta said China was also adding capacity.

    "I understand (the Chinese) have put a cap on (steel) capacity, which means larger plants can increase capacity and have more efficient capacity, and less efficient capacity will be taken out of the system," Gupta told Reuters on Thursday on the sidelines of the CRU World Aluminium Conference in London.

    "If anything it makes it worse (for rival steelmakers) because its makes (China) more efficient, more competitive."

    Gupta, who was bullish on steel even during the crisis in 2015, said there are still distressed plants that offer value, even though steel company shares globally have risen by 80 percent since early January 2015.

    In the U.S., Gupta is betting anti-dumping moves under President Donald Trump will hurt the much larger manufacturing base in the long term.

    The Trump administration last month invoked a seldom-used provision of law to launch a probe into whether imports of Chinese and other foreign-made steel are a U.S. national security risk.

    It currently has around 150 anti-dumping and anti-subsidy duties in place on steel imports, while the European Union has 39 such measures in place on steel.

    "I'm not a supporter of protectionism. I encourage the general move in the U.S. for investment in industry, but protectionism ... long term ... makes (industry) more inefficient and kills downstream (businesses)."

    Gupta's 'greensteel' model is based on using renewable energy to fire furnaces that recycle locally sourced scrap and feed the finished steel to his manufacturing businesses that make high value-added goods.

    The model puts Liberty's steel plants low down the cost curve, where they are less impacted by policy decisions.

    Liberty's move into steelmaking, aluminium smelting and engineering, which started late in 2015, helped operating profit jump 74 percent to $99 million in 2016, while turnover soared 82 percent to $6.8 billion.


    Gupta, who launched Liberty House 25 years ago while studying at Cambridge University, plans to list some of its multibillion-dollar businesses, probably in 2018.

    Liberty and SIMEC, which operate under the $9.4 billion Gupta Family Group (GFG) Alliance, has assets spanning steelmaking, aluminium smelting, engineering, energy, commodities trading, shipping, property and finance.

    Gupta hit the headlines last year when it offered to rescue steel plants owned by Tata Steel UK (TISC.NS>. He has spent around $630 million on acquisitions in the past year.

    "(Listing) will happen sooner or later for sure ... 2018 is a soft target," said Gupta.

    "We want at least one if not more of the businesses to be in the public space, like energy for example, maybe steel eventually, but I'm not sure the UK is the right place for it, maybe the U.S."

    Gupta previously told Reuters he was considering a partial listing in London but that a firm decision had yet to be made.

    He said on Thursday that the energy business listing would probably be in London, but not steel.
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    Shenshuo rail line April coal transport reaches a record high

    Shenshuo rail line transported 21.82 million tonnes of coal in April, rising 12.1% from the year-ago level, hitting a record high, said Shenshuo Railway Co., Ltd, a subsidiary of Shenhua Group.

    Of this, the average haulage in the month reached 186.2 wagons.

    The 266-km line, which starts from Daliuta in Shaanxi province and ends in Shuozhou in neighboring Shanxi province, mainly delivers coal from Shenfu and Dongsheng coal fields owned by Shenhua Group.
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    Anglo American sells Drayton to unlisted Malabar Coal

    Diversified miner Anglo American has struck a sales agreement with unlisted Malabar Coal to divest of its 88.17% interest in the Drayton thermal coal and the much aligned Drayton South project, in New South Wales.

    “The agreement to sell the Drayton thermal coal mine marks further progress as we focus our global portfolio around our largest and most competitive assets,” Anglo CEO Mark Cutifani said on Thursday.

    Anglo in 2016 announced plans to divest of its coal interests in Australia, after narrowing its focus to diamonds, platinumand copper.

    The Drayton transaction, details of which are confidential, will be effected through a share sale in Anglo’s subsidiary companies that hold the Drayton interest. The transaction remains subject to several conditions precedent.

    Anglo American ceased mining operations at Drayton in 2016, after plans for the Drayton South coal project have been repeatedly rejected by the New South Wales Planning and Assessment Commission over fears that it will impact on nearby horse stud farms.

    Anglo previously adjusted the mine plan for the Drayton South operation, including reducing the tonnage from a projected 189-million tonnes to only 75-million tonnes and cutting some A$7-billion in coal revenue. The mine plan also reduced the life of the operation from 27 to 15 years.
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    Positive prices buoying ferrochrome business – Merafe

    Ferrochrome prices for the first half of 2017 are providing ongoing momentum for the ferrochrome business, which is poised to benefit from this year’s stainless steel production growth rate forecast of 3.5%.

    The demand for ferrochrome is driven overwhelmingly by the production of stainless steel, which in 2018 is projected to grow by an even higher rate of 3.8%.

    The latest European benchmark ferrochrome price for the three months to June 30, 2017, has been settled at $1.54/lb, well up on the average of $0.95/lb of 2016 and the $1.07/lb of 2015.

    Though slightly lower than the first-quarter price of $1.65c/lb, the second-quarter price settlement continues to indicate a deficit in supply.

    Pricing for the first half of this year is positive, Merafe Resources CEO Zanele Matlala commented to Mining Weekly Online during an exclusive interview.

    Starting this year, Merafe’s policy is to pay a minimum dividend equal to 30% of yearly headline earnings and then also to declare special additional distributions of remaining cash not required within the business.

    The idea is to return as much as possible to shareholders.

    JSE-listed Merafe was formed in 2001 and had its own chrome smelter and two chrome mines, which were pooled with those of the former Xstrata in July 2004 to form the Glencore-Merafe Chrome Venture, the largest ferrochrome producer in the world, which operates eight chromite mines and 22 ferrochrome furnaces.

    The way the Glencore-Merafe Chrome Venture works is that both parties retain ownership of the assets that each contributed to the venture, which uses those assets to generate the earnings before interest, taxes, depreciation and amortisation (Ebitda) that are shared in the ratio of 79.5% Glencore to 20.5% Merafe.

    “Our partner, Glencore, markets our products efficiently, adds value logistically and gets good prices,” said Matlala, who heads a company that employs six people at its head office and pays 20.5% of the salaries of the venture’s 13 000-plus employees.

    Eighty-seven per cent of its board members are black, 62% of its board members are women and 71% of its employees are black.

    In the 12 months to December 31, 2016, Merafe’s share of the venture’s Ebitda was R1 176.2-million, 38% higher than in 2015.

    Glencore has a 29% shareholding in Merafe and South Africa’s State-owned Industrial Development Corporation a 22% shareholding.

    The rest of the shareholding is in free float, 41% of it in South Africa and the remaining 8% offshore.

    In the past 18 months, the Merafe share has become far more liquid owing to investment management companies and institutions showing increasing interest in the share, which has been trading at prices well below the 190c a share. The analyst consensus on the share is currently between 179c to 300c a share.


    Merafe has a strong investment case that centres on factors such as its strong cash-flow generation, its secure long-term supply of ore reserves, its partnership with the global leader of chrome-ore and ferrochrome marketing, and its energyefficient technology that makes Merafe the lowest-cost producer in South Africa and the second-lowest cost producer in the world.

    Cost containment and cost reduction are the major pursuits of both the Glencore-Merafe Chrome Venture and the Merafe head office, where corporate costs fell to R30.2-million in 2016 compared with R34-million in 2015.

    Chrome ore, electricity and reductants are the main cost contributors. The cost of chrome ore is driven mainly by labour, with wages being negotiated by labour unions.

    The cost of electricity, which has been a major factor in the past, is no longer as big a concern, exemplified by the National Energy Regulator granting electricity utility Eskoma tariff increase from April 1, of 2.2%, the lowest for some time.

    Because of the use of Premus technology at the Lion II smelter, a key competitive advantage is that the venture’s power costs are lower than those of its competitors.

    Had the Lion operation not installed the Premus technology, it would have needed an additional 1 776 MWh to produce the same volume of ferrochrome.

    Reductant costs have also been declining. The Lion smelteralso uses considerably less coke and more locally produced, lower-cost anthracite and char than conventional smelters.

    Efficiency is increased through pelletising to cope with increasing volumes of fine chrome ore, with the pelletised material put through prereduction kilns that radically reduce furnace time and, thus, electricity consumption.

    The exchange rate of the rand against the dollar is a significant factor because most of the Merafe product is sold in dollars, making the conversion to rand important.

    The exchange rate prevailing at the time of going to press was similar to the 2016 average exchange rate of R14.70 to the dollar.

    Ranking after cost management on the priority list is debt reduction. In early 2017, Merafe debt was reduced to R226-million, the planned elimination of which in the next two years will position Merafe to take advantage of opportunities that may arise and augment dividend payouts.

    When the company was investing heavily in large new cost-reducing projects in past years, there were more moderate dividend prospects for share investors than is the case now that the company is harvesting the fruits of all those investments and has fewer demands on its cash.

    Throughout the lengthy period of capital project funding, Merafe at no stage resorted to the raising of equity capital and in the main funded most the capital programme from cash flow.

    The large Lion II smelter project was funded largely from cash flow and some debt, which has been substantially repaid, as have is capital contributions to the Bokamoso and Tswelopele pelletising and sintering plants, the upper group two plants and the Wonderkop acquisition.

    Last year’s ferrochrome revenue and chrome ore revenue were the highest ever.

    Merafe reported a 61% year-on-year increase in chrome ore revenue on 38% higher chrome ore sales volumes to 372 000 t and 7% higher chrome ore prices.

    The record production of 393 000 t in 2016 was only at about 82% of installed capacity and the company’s latest guidance to the market is that production at a level of 85% of installed capacity of 2.339-million tonnes is achievable in 2017, taking into account the maintenance carried out during the winter months when power is more expensive.

    The record level of sales of 437 000 t in 2016, which included selling from stock, will not be repeated in 2017.

    The company recorded its highest profit in 2008, when ferrochrome prices soared to $2/lb. With excess electricity
    supply now available, incentivised rates may well be negotiated for the winter months for additional use of electricity.

    Merafe’s attributable ferrochrome production from the Glencore-Merafe Chrome Venture for the first quarter of 2017 increased by 10% to 113 000 t compared to the comparative period. This increase was primarily attributable to improved performances and efficiencies across Venture’s furnaces, coupled with the restarting of Rustenburg furnace 5 in the second half of 2016. Merafe will hold its next annual general meeting on May 4 and present its interim results for the first six months of 2017 on August
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    China iron ore imports ease in April amid cloudy outlook

    China iron ore imports ease in April amid cloudy outlookThe heat came out of China's iron ore imports in April, with vessel-tracking and port data suggesting a decline of several million tonnes from the near-record levels recorded in March.

    A total of 83.27 million tonnes of the steel-making ingredient was discharged at Chinese ports in April, down 3.7 percent from March's 86.46 million, according to data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.

    It's worth noting that the vessel-tracking and port data typically comes in below the official Chinese customs data, which reported 95.56 million tonnes of iron ore imports in March, the second-highest on record.

    Nonetheless, the ship data does point to lower imports in April, most likely in the order of 3 million tonnes. Apart from a weak month in February, most likely related to the Lunar New Year holidays, the vessel-tracking figures show April to be the weakest month for iron ore imports since September last year.

    It also appears that much of the decline in iron ore imports was borne by Australia, China's largest supplier, with the data showing imports of 53.9 million tonnes in April, down from 58.9 million in March.

    In contrast, number two supplier Brazil saw Chinese imports of 18.48 million tonnes in April, up from March's 16.54 million. The lower imports from Australia in April are most likely the result of earlier weather-related disruptions in the main producing area of Western Australia state that affected both mines and rail networks.

    This means imports from Australia are likely to recover again in May, which may be a bearish signal for prices if miners such as Rio Tinto, BHP Billiton and Fortescue Metals Group decide to chase volumes over prices.

    This can already partly be seen by the 11 percent jump in iron ore shipments from Port Hedland, the terminal used by BHP and Fortescue, to 34.86 million tonnes in April from 31.5 million in March. This tallies with the Chinese import numbers from Thomson Reuters, given the sailing time of around two weeks between northwest Australia and China.

    Ultimately iron ore prices are driven by steel prices and margins, and here the outlook is less certain, with the main Shanghai rebar contract trending lower in recent weeks. It hit a peak of 3,440 yuan ($499) a tonne on March 15, but slipped 9.2 percent since then to Wednesday's close of 3,123 yuan, as doubts emerged among market participants over the resilience of China's infrastructure and construction spending.

    While Chinese steel output has remained robust so far this year, the market seems to be swinging toward the view that margins will be under pressure in the second half of the year as domestic demand growth slows and exports struggle.
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    China's key steel mills daily output up 0.14pct in mid-April

    Daily crude steel output of China's key steel mills gained 0.14% from ten days ago to 1.85 million tonnes over April 11-20, according to data released by the China Iron and Steel Association (CISA).

    Crude steel output in the country was estimated at 23.2 million tonnes during the same period, with daily output of 2.25 million tonnes in mid-April.

    By April 20, stocks of steel products at key steel mills stood at 14.56 million tonnes, up 1.91% from ten days ago, the CISA data showed.

    Rebar price dropped 6% from ten days ago to 3,412.3 yuan/t in mid-April, while wire price decreased 5.5% from ten days ago to 3,484.7 yuan/t.
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    India's cabinet makes local steel mandatory in govt projects

    India's cabinet on Wednesday approved a proposal to make the use of local steel mandatory for government's infrastructure projects, Finance Minister Arun Jaitley said, aimed at boosting the sales of local companies.

    The ministry's flagship National Steel Policy, which seeks to outline a roadmap to increase the country's annual steel production to 300 million tonnes by 2025, was also passed by the cabinet, Jaitley said.

    An official with direct knowledge of the matter told Reuters earlier that Prime Minister Narendra Modi's cabinet might clear the proposals.

    The policy is broadly seen as a continuation of India's protectionist stance against countries such as China and Russia.

    It also comes in the backdrop of a trade probe launched by U.S. President Donald Trump against cheap imports into the United States, in a move that could aggravate trade friction among global producers.

    India wants to nearly triple its production capacity by the next decade and acquire technology to produce higher value products including automotive steel.

    The government policy will also provide a guiding light for Indian steel companies that are seeking to expand while saddled with huge debts.

    In March, Reuters had reported the steel ministry was considering a move making it mandatory to use local steel - pitching it as a WTO-compliant move.

    India is also expected to soon announce long-term duties on some steel products imported from China, Japan and Russia, despite complaints from some of the targeted countries.

    Between April and March, India's steel imports fell 37 percent year-on-year, data from a government body showed, primarily due to measures announced by the government.

    The proposed National Steel Policy, which was floated in October by Niti Aayog, an influential government think-tank that replaced the Planning Commission, recommended measures to also reduce dependence on imported coking coal, lack of which recently crippled production after heavy rains in Australia created shortages.
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    European steel M&A heats up even for loss-making plants

    In late 2015, the steel industry - a gauge of the world's economic health - was on the ropes. Record Chinese exports, excess global capacity and shrinking demand had pushed prices to decade lows, forcing closures, lay-offs and bankruptcies.

    The picture couldn't look more different today. Thanks to China's decision to dramatically cut capacity while boosting infrastructure spending, added to the improved outlook for global growth and increased protectionism, prices have surged some 45 percent since December 2015.

    A boom in mergers and acquisitions has followed, with investors competing to fork out billions for steel companies once considered nigh on worthless.

    Germany's Thyssenkrupp (TKAG.DE) struck a deal in February to sell money-losing Brazilian steel mill CSA to Ternium SA (TX.N) for $1.3 bln. India's Tata Steel (TISC.NS), which threatened to shut its loss-making UK assets last April, is now in talks to merge its UK and European plants with those of Thyssenkrupp.

    But perhaps the starkest example of the turnaround is in the bidding war for Ilva, in Taranto, southeast Italy.

    Europe's largest and most troubled steel plant, Ilva has racked up hundreds of millions of euros worth of losses since coming under government stewardship in 2013.

    The plant has been dogged by charges of corruption and environmental crime for years. In 2012, Italian authorities ruled emissions of dust and cancer-causing chemicals from the plant caused hundreds of deaths and abnormal levels of tumors and respiratory disease in the Taranto region.

    About half the plant's 11-million-tonne annual steelmaking capacity was eventually mothballed, senior managers and executives were arrested and 8 billion euros of assets were seized from the Riva Group, Ilva's former owners.

    Yet two consortiums - one including ArcelorMittal .ISPA.AS, the world's top steelmaker, and the other involving Indian steelmaker JSW (JSTL.NS) - are now vying to spend around 4 billion euros buying, upgrading and cleaning the plant, betting that imports into Europe will decline just as the economy picks up.

    It's a bet worth making, steel executives say.

    "With reduced import volumes, Ilva's additional output will be absorbed. The domestic market is not booming but it is growing, and we should continue to see a steady increase in industrial activity in Europe," Tommaso Sandrini, president of Italian steel processors association Assofermet, told Reuters.

    Renewed M&A activity is expected to lead in turn to capacity cuts which will further boost prices, they say.

    Of the Tata merger, Thyssenkrupp's chief financial officer Guido Kerkhoff said: "The most important thing for us is that by a consolidation ... we can address the issues of overcapacity."


    As with so many sectors of the global economy today, China is the key to the reversal of steel's fortunes.

    The world's top steel maker in early 2016 said it would to cut 100-150 million tonnes of steel capacity by 2020 as part of efforts to tackle pollution and curb excess supply.

    It cut 60 million tonnes of steel capacity last year alone, according to official figures, and has announced plans to cut another 50 million tonnes this year.

    The cuts coincide with a 700-billion-dollar stimulus splurge targeted at infrastructure and construction that prompted a 73 percent jump in Chinese steel prices SRBcv1 last year and a 3.5 percent fall in Chinese exports. >

    Exports have dropped a further 25 percent this year.

    Soaring prices have translated into big gains for steel company shares. Global steel equities .TRXFLDGLPUSTEL are up 80 percent since plumbing 12-year lows last January.

    The World Steel Association expects steel demand in developed economies to grow 0.7 percent this year and 1.2 percent next, with eurozone interest rates and tax policy set to remain on a steady course and the United States seen benefiting from tax cuts and rising infrastructure spending.

    Factories across the euro zone increased activity in March at the fastest rate in nearly six years, official figures show.

    "We have in front us years of sustainable profits for European producers," said Sandrini, who is also chief executive of Italian steel processor S.Polo Lamieri.


    European steel lobby Eurofer says local steelmakers are finally set to benefit from the demand growth this year thanks to the cumulative impact of anti-dumping measures.

    The EU currently has 39 anti-dumping and anti-subsidy measures in place on steel, 17 directed at China and most of which have been put in place over the past couple of years.

    Across the pond, U.S. steelmakers are getting an even more pronounced boost from a string of steel trade barriers put in place under the Barack Obama administration which are poised to multiply under President Donald Trump.

    The Trump administration said last month it will invoke a seldom-used provision of law to launch a probe into whether imports of Chinese and other foreign-made steel are a U.S. national security risk.

    That will come on top of some 150 anti-dumping and anti-subsidy duties already in place on steel imports, according to the Cato Institute, a think tank.

    China's exports to the United States fell 56 percent last year, mostly due to these measures, some of which are as high as 500 percent, according to the International Steel Statistics Bureau.

    "The Chinese are now out of the (steel export) game and many other countries will be out too, considering the number of anti-dumping investigations in place," Sandrini said.

    Berenberg analyst Alessandro Abate told Reuters Ilva's privatization alone will see EU steel prices rise by 10-20 euro per ton as regional buyers pay a premium for supply which, relative to imports, is of higher quality and can be delivered quickly and reliably.

    The new owners of Ilva and of the Tata-Thyssenkrupp assets are also expected to employ a more disciplined pricing strategy going forward - holding out for higher prices and taking pains not to over-supply the market, unlike in the past when Ilva, and to a lesser extent Tata, favored volumes over price.

    Alistair Ramsay, research manager at Metal Bulletin Research (MBR), said he disagreed with talk of "peak steel demand", and pointed to consistent annual imports into Europe over the past few years of 5 million tonnes of hot rolled coil, the main steel product used by white goods manufacturers.

    "If you've got a duty to place against those imports, then suddenly that steel must be found somewhere else," Ramsay told Reuters. "If one has control of Ilva and there's a bit more control over EU borders, its potentially a pretty lucrative situation."
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    Henan to stop approving new coal mine projects over 2016-18

    Henan province in central China pledged to stop giving approval for new coal mine projects and projects of technical upgrading and capacity expansion for newly-added coal production capacity over 2016-2018, said the provincial government in a notice released on April 26.

    If it is necessity to build new coal mines, capacity replacement should be carried out to avert unreasonable expansion, according to the notice.

    The province plans to shed 39.63 million tonnes per annum (Mtpa) of coal production capacity by closing 158 coal mines during the next two years, said the provincial Development and Reform Commission on its website December 11.

    It will close mines that fail to obtain licenses or use mining methods prohibited by the government. Meanwhile, those mining coal in natural reserve areas, water conservation protection zones and scenic spots would also be shut down.
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    Arch: divi+ stock buyback

    Arch Initiates Capital Allocation Programs 

    As a result of the company's healthy liquidity position and expectations for continued cash generation in 2017, the Board of Directors has approved two capital allocation initiatives to enhance shareholder returns. First, the board has instituted a quarterly cash dividend of $0.35 per share. The quarterly dividend will begin with the second quarter and will be paid on June 15, 2017 to stockholders of record on May 31, 2017.

    In addition, the board has approved the establishment of a share repurchase program that authorizes the company to purchase up to $300 million of the company's outstanding common stock. The repurchase program announced today has no time limit and Arch expects to fund future share repurchases with cash on hand and cash generated from operations.

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    Iron ore climbs on Chinese restocking

    The end of the Labour Day holiday in China saw fresh demand for iron ore and steel, with both commodities rising in tandem today.

    Reuters reported that Chinese steel futures rose to their highest in almost a month, supported by restocking demand after the holiday.

    "After the holiday there's a bit of restocking demand, that's why you see steel prices come up quite substantially and it's reflected in futures": Helen Lau,  analyst at Argonaut Securities

    The most active rebar contract on the Shanghai Futures Exchange climbed 2.2% higher at $454 a tonne. Iron ore, a key ingredient in steelmaking, hit $77.28 a tonne on the Dalian Commodity Exchange, a gain of 4.7%. Four days ago the Northern China import price of 62% Fe content ore traded up 2.1% at $68.00.

    "After the holiday there's a bit of restocking demand, that's why you see steel prices come up quite substantially and it's reflected in futures," Reuters quoted Helen Lau, an analyst at Hong-Kong based Argonaut Securities. She said market participants are watching closely Beijing's plans to tighten monetary policy, which would make it harder for Chinese steel mills to get loans.

    In April iron ore sunk to five-month lows, but the steelmaking raw material is still trading in positive territory compared to this time last year. The recovery comes on the back of higher steel prices in China, which consumes nearly three-quarters of the world's seaborne ore.

    Iron ore's fightback comes despite dire predictions for the price outlook.

    In a report released last week BMI Research forecasts prices are entering a multi-year slump, averaging lower each year through to 2021. The forecasters expect the commodity to average $70 a tonne this year (year-to-date the average price is just under $82), $55 in 2018, and decline to $46 by 2021, on rising supplies from Australia and Brazil.
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    Australian PWCS coal exports to China, S Korea surge in April, offset reduced flow to Japan

    The Port Waratah Coal Services terminals at the Port of Newcastle, Australia, saw steady-to-firm exports in April, with sharp increases to China, South Korea and Taiwan offsetting reduced shipments to Japan, data from the operator showed Tuesday.

    A total of 9.69 million mt of coal was shipped from PWCS in April, up 5% year on year and 4% month on month, PWCS said.

    The 145 million mt/year shipment capacity terminals shipped 36.57 million mt in January-April, which translates to an annualized rate of 108.2 million mt/year -- fairly well in line with the same period in 2016.

    Thermal coal made up a bigger than usual percentage of the exports in April at 89%, which compares to 86% for both January-March 2016 and for 2016 as a whole, PWCS said.

    The rest of the coal that is shipped is metallurgical. Shipments to PWCS' largest export destination, Japan, slipped 10% year on year and 18% month on month to 4.01 million mt in April, the figures showed.

    It was an eight-month low. Exports to China hit a 27-month high at 1.83 million mt in April, up 39% year on year and 61% from March, it said.

    Shipped volumes to South Korea surged 57% year on year to a 15-month high of 1.32 million mt in April, which is also up 35% from March, it said.

    Volumes to Taiwan were up 49% year on year and 34% month on month at 1.66 million mt in April -- a seven-month high.

    There was just 50,000 mt sent to India during the month, which is down 63% from April last year, but up from zero in March, the data showed.
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    CHINA SHENHUA Q1 Net Profit Up 172.9%

    CHINA SHENHUA  Q1 Net Profit Up 172.9%

    CHINA SHENHUA (01088.HK)  announced results for the quarter ended 31 March 2017. Operating revenue climbed 55% year on year to RMB61.062 billion. Net profit amounted to RMB12.937 billion, up 172.9%. EPS was 65 fen.

    During the quarter, commercial coal production added 9.4% to 78 million tonnes.
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    6 cities in Shanxi to set "non-coal" areas this year

    Six cities in China's northern Shanxi province will set "non-coal" areas in 2017, part of government efforts to improve air quality, especially in peak demand winter season.

    By end-October, Taiyuan, Yangquan, Changzhi, Jincheng, Linfen and Jinzhong all should stop using coal to fuel small boilers for heating purpose in winter, according to an air pollution prevention and control plan recently released by the provincial government.

    These six cities belong to a Beijing-surrounded city cluster, which is the main target for air quality improvement on the government's agenda.
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    Iron ore price rebounds

    The Northern China import price of 62% Fe content ore enjoyed another day of solid gains on Friday to trade up 2.1% at $68.00 per dry metric tonne according to data supplied by The Steel Index. Higher grade iron ore with 65% iron ore content topped $80 a tonne for the first time in two weeks.

    Iron ore has recovered 10.6% in value since hitting five-month lows earlier this month and the steelmaking raw material is still trading in positive territory compared to this time last year. The recovery comes on the back of higher steel prices in China which consumes nearly three-quarters of the world's seaborne ore.

    Iron ore's fightback comes despite dire predictions for the price outlook.

    In a report released this week BMI Research forecasts prices are entering a multi-year slump, averaging lower each year through to 2021. The forecasters expect the commodity to average $70 a tonne this year (year-to-date the average price is just under $82), $55 in 2018, and decline to $46 by 2021, on rising supplies from Australia and Brazil.

    On the demand side stockpiles in China has been a major factor behind iron ore's slide from near triple digits in February. According to this week's Umetal's survey of the 42 largest ports in China, total iron ore inventories have stayed near record highs at more than 132 million tonnes.

    Elevated stocks have not dampened importer enthusiasm however with total imports for the first quarter climbing 12% to 271 million tonnes after the second highest cargo volumes recorded in March of 95.6m tonnes.
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    Russian steelmaker NLMK's earnings more than double on higher prices, sales

    Russian steelmaker NLMK's core earnings more than doubled in the first quarter, beating expectations, on higher prices and export sales and an improving domestic economy.

    Steel manufacturers in Russia, such as market leader NLMK and its closest competitor Evraz, have struggled over the last two years as oversupply helped to push world steel prices to 11-year lows and Russia's economic crisis sapped domestic demand.

    But prices have picked up and prospects for the sector are expected to improve further this year on expectations of the Russian economy returning to growth.

    "In Q1 2017, NLMK Group was able to grow sales in the EU and U.S. markets against a backdrop of higher internal demand," NLMK Chief Financial Officer Sergey Karataev said in a statement.

    NLMK, controlled by Russian billionaire Vladimir Lisin, posted earnings before interest, taxation, depreciation and amortisation (EBITDA) totalled $618 million, beating an average of analysts' forecasts in a Reuters poll of $598 million. EBITDA was $290 million in the first quarter of last year.

    Chief Executive Oleg Bagrin said NLMK's stronger earnings could lead management to recommend a first quarter dividend payout higher than that outlined in its policy.

    Speaking on a conference call with investors, Bagrin said the matter would be discussed at a board meeting on Friday.

    "Probably, given the financial position and performance of the company, the dividend payout proposed by the management will be above the policy targets," he said.

    NLMK's current policy states that dividend payouts are to be made in the range of 50 percent of net income and 50 percent of free cash flow, as long as the company's net debt to EBITDA ratio is one or below.

    Its net debt to EBITDA ratio was 0.4 in the first quarter while free cash flow totalled $208 million, down 24 percent year-on-year.

    NLMK's revenue rose 37 percent year-on-year to $2.2 billion on higher prices for its products, the company said.

    Net profit was $323 million in the first three months of 2017, versus $57 million in the same period last year when the company said its earnings were hit by losses incurred from exchange rate fluctuations.

    Attached Files
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    Nippon Steel FY profit falls 13 pct, hurt by surging coal prices

    Nippon Steel & Sumitomo Metal Corp, Japan's biggest steelmaker, said its recurring profit for the year ended March slid 13 percent, hit by higher coking coal costs, and held off from issuing earnings predictions for the current year citing volatility on coal and steel pricing.

    The world's third-largest steelmaker said in a statement on Friday that recurring profit - pre-tax earnings before one-off items - declined to 174.5 billion yen ($1.6 billion) from 200.9 billion yen the previous fiscal year. That beat both its own estimate of 130 billion yen and a consensus of 145.9 billion yen from 14 analysts surveyed by Thomson Reuters I/B/E/S.

    "We can't make reasonable forecast now since it is unclear where prices of coking coal and steel prices are headed," Nippon Steel's executive vice president Toshiharu Sakae said at a news conference.

    "But we'll make various efforts to boost our profit this year," Sakae said. Steady steel demand at home and abroad, plans to cut costs by over 50 billion yen, and scheduled price hikes on some products of about 5,000 yen per tonne would help offset heavier raw materials costs, he said.

    A mean forecast of 15 analysts for Nippon Steel's recurring profit for this year comes to 308 billion yen, according to Thomson Reuters I/B/E/S.

    Higher-than-planned steel shipments and stronger earnings in its overseas units contributed to results beating the company's own estimates, Sakae said. Reflecting that, Nippon Steel raised its annual dividend for the last year by 20 yen to 45 yen per share.

    While Sakae didn't give a detailed outlook on coking coal prices, he said raw material prices will likely become less volatile.

    The price of coking coal - a vital steelmaking ingredient - has been volatile, nearly quadrupling between March and late November 2016, but then halving between that time and the end of March 2017.

    Last month brought a new twist, when Cyclone Debbie hit Australia, cutting rail lines in the world's biggest coking coal export region and sending prices higher again. While rail links have been restored, Japanese steelmakers have had to scramble for alternative supplies.

    On Thursday, JFE Holdings Inc, Japan's No.2 steelmaker, reported recurring profit jumped nearly by a third in the 12 months that ended March, boosted by hefty appraisal gains on inventories of coking coal.

    JFE also increased its annual dividend estimate for the last year by 10 yen to 30 yen per share.
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