Mark Latham Commodity Equity Intelligence Service

Friday 21st August 2015
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    Port of Tianjin

    From Wikipedia, the free encyclopedia
    Port of Tianjin
    200x182 pixels Logo of the Port of Tianjin
    Country  People's Republic of China
    Location Tianjin
    Coordinates 38°58'33" N 117°47'15" E
    Opened 1860 (Port of Tanggu); 1952-10-17 (Tianjin Xingang reopening)
    Operated by Tianjin Port Group Ltd
    Owned by Tianjin State-owned Assets Supervision and Administration Commission
    Type of harbor Deep-water Seaport/Riverport
    Land area 121 km2[1]
    Size 260 km2 (470 km2 total jurisdictional area)
    Available berths 217; Production Berths: 140 (2010)[2]
    Employees 20,000 (2008)
    Chairman Yu Rumin
    World Port Index Number 60190
    Nautical Charts 94363/0 (NGA/NIMA); 2653/4 (Admiralty); 11773/4(Chinese)
    Annual cargo tonnage 500 million tonnes (2013)
    Annualcontainervolume 13 million TEU (2013)
    Value of cargo 197.249 billion USD (2011)[3]
    Passenger traffic 110,000 cruiser passengers (2012)[4]
    Annual revenue 21.5 billion RMB (2011)[5]
    Net income 1.678 billion RMB (2011)[6]
    This article contains Chinese text.Without proper rendering support, you may see question marks, boxes, or other symbols instead of Chinese characters.

    Coordinates: 38°58′33″N 117°47′15″E

    The Port of Tianjin (Tianjin GangChinese天津港pinyintiānjīn gǎng), formerly known as the Port of Tanggu, is the largest port in Northern China and the main maritime gateway to Beijing. The name "Tianjin Xingang" (Chinese天津新港pinyintiānjīn xīngǎng; literally: "Tianjin New Port"), which strictly speaking refers only to the main seaport area, is sometimes used to refer to the whole port. The port is on the western shore of the Bohai Bay, centred on the estuary of the Haihe River, 170 km southeast of Beijing and 60 km east of Tianjin city. It is the largest man-made port in mainland China,[7] and one of the largest in the world. It covers 121 square kilometers of land surface, with over 31.9 km of quay shoreline and 151 production berths at the end of 2010.[8]

    Tianjin Port handled 500 million tonnes of cargo and 13 million TEU of containers in 2013,[9] making it the world's fourth largest port by throughput tonnage and the ninth in container throughput.[10] The port trades with more than 600 ports in 180 countries and territories around the world.[2] It is served by over 115 regular container lines.[11] run by 60 liner companies, including all the top 20 liners. Expansion in the last two decades has been enormous, going from 30 million tonnes of cargo and 490,000 TEU[12] in 1993 to well beyond 400 million tonnes and 10 million TEU in 2012.[13] Capacity is still increasing at a high rate, with 550–600 Mt of throughput capacity expected by 2015.

    The port is part of the Binhai New Area district of Tianjin Municipality, the main special economic zone of northern China, and it lies directly east of the TEDA. The Port of Tianjin is at the core of the ambitious development program of the BNA and, as part of that plan, the port aims to become the primary logistics and shipping hub of North China.

    On 12 August 2015, at least two explosions within 30 seconds of each other occurred at a container storage station at the Port of Tianjin in the Binhai New Area of Tianjin, China. The cause of the explosions was not immediately known, but initial reports pointed to an industrial accident. Chinese state media said that at least the initial blast was from unknown hazardous materials in shipping containers at a plant warehouse owned by Ruihai Logistics, a firm specializing in handling hazardous materials.Image title

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    China Aug flash Caixin/Markit PMI hit a new low

    China Aug flash Caixin/Markit PMI hit a new low

    The flash reading of China’s Caixin/Markit general manufacturing Purchasing Managers’ Index (PMI) further fell 0.7 from the final figure in July to 47.1 in August, hitting a 77-month low, data showed on August 21.

    That compared with an expected reading of 48.2, posting the sixth consecutive month below the 50-point threshold separating growth from contraction, suggesting China’s economic conditions are still deteriorating.

    The output sub-index was 46.6 in August, down 0.5 from July, hitting a 45-month low, indicating a slower growth in manufacturing sector.

    The sub-indexes for new orders, new export orders and employment all registered decreases, signaling the weakening demand and a worsening labor market.

    The flash PMI data has fallen further from July’s two-year low, indicating that the economy is still in the process of bottoming out. But overall, the likelihood of a systemic risk remains under control and the structure of the economy is still improving.

    There is still pressure on the front of maintaining growth rates, and to realize the goal set for this year the government needs to fine tune fiscal and monetary policies to ensure macroeconomic stability and speed up the structural reform, He Fan, Chief Economist at Caixin Insight Group said.
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    Safety hazards found at 70 pct of Beijing chemical firms inspected - Xinhua

    Safety hazards found at 70 pct of Beijing chemical firms inspected - Xinhua

    Safety hazards have been found at almost 70 percent of firms handling dangerous chemicals inspected in Beijing since two massive blasts killed 114 people last week, including a branch of Asia's largest refiner Sinopec Corp, state media reported.

    An inspection of 124 sites that stored dangerous chemicals in the Chinese capital found hazards at 85 firms, the official Xinhua news agency said late on Thursday, citing Beijing's work safety bureau.

    Two of those firms were shut after inspectors found they did not meet appropriate safety standards.

    Inspectors found that security personnel at the Beijing branch of Sinopec Corp were unfamiliar with how to handle an oil tank fire, Xinhua said. Employees were also found smoking in dormitories near the facility, it said.

    "Companies that fail our inspections will be ordered to suspend operations, and their warehouses will be put under 24-hour surveillance," Qian Shan, vice-head of the Beijing work safety bureau, was quoted as saying by Xinhua.

    Beijing has also suspended operations at firms that make or deal in highly toxic chemicals and explosives from Aug. 17 to Sept. 6 in preparation for a military parade and athletics event, Xinhua said.

    A nationwide inspection of facilities handling dangerous chemicals and explosives was ordered by the State Council a week ago. It said in a statement on Thursday that advanced equipment and the best expertise needed to be used to prevent major environmental incidents in the future.

    Xinhua said more than 300 inspection teams in southwestern Sichuan province had checked 1,258 chemical-related firms and had ordered one company to stop production.

    Northwestern Gansu province had also ordered chemical companies with fire or explosion risks to suspend operations. Marine authorities in the coastal city of Shanghai, China's financial hub, are reviewing ships that transport dangerous goods, it said.

    On Wednesday, three oil and gas firms close to residences were told by authorities in the cities of Hangzhou and Shenzhen to halt operations.

    Chinese emergency workers raced to put out four new fires that had broken out close to the site where two massive explosions in a warehouse storing dangerous chemicals killed 114 people last week, the official Xinhua news agency said on Friday.

    Xinhua said one of the "ignition points" came from within an automobile distribution area near the blast site and the other three were within the central blast area.

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    President Xi lowers official growth target?

    Xi’s economic planners may for the first time emphasize “population policies” over gross domestic product in the country’s next development blueprint, said the person, who asked not to be identified because the talks are private. The focus sets the stage for a host of rule changes regarding health, pensions, social welfare and possibly lifting the caps on children some families can have, the person said.

    More than three decades into an industrial boom that has created the world’s second-largest economy, China’s struggling to get rich before it grows old. The working-age population shrank for the first time in at least two decades last year as growth slowed, echoing Japan’s downturn in the late 1990s. As part of the shift, the party may lower its hard growth target of 7 percent to a range between 6.5 percent and 7 percent and make that a flexible guideline, the person said.

    Mu Guangzong, a professor at Peking University’s Institute of Population Research, said that avoiding the same fate requires immediate action to loosen birth limits and strengthen the social safety net for the elderly.

    The number of people 15 to 64 years of age fell about 1.6 million last year, according to the National Bureau of Statistics. Like Japan, the decrease has coincided with a slowdown in China’s economy, which is on track this year to grow at its slowest pace in a quarter century.
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    ECB Statistical Paper on 'Google Bullishness'

     Google bullishness:
    In a similar fashion to Twitter bullishness TtB, namely as per Equation (1), we define Google bullishness GwB from the volumes of Google queries that contain the corresponding financial terms. The volume of such queries is determined using Google Trends, which necessitates a few notable changes. First, we find that the volumes of Google searches on the adjectives “bullish” and “bearish” are insignificant, most likely because isolated adjectives are rarely the subject of searches made by Google users. Indeed, Google Hot Trends indicates that the overwhelming majority of search queries are nouns. We therefore replace the adjectives “bullish” and “bearish” with equivalent terms, i.e. “bull market” and “bear market”, for our Google bullishness indicator GwB . These ensure a greater depth of coverage.Image title

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    Saudi Rial under pressure, Kazach Tenge plunge.

    Image titleUnder pressure. Saudi banks whinging that the gov't is borrowing from them without giving them an insight into the budget.
    Image title
    Tenge plunges. Kazakhstan: home of dubious parastatal resource companies, an aging dictator, and a enormous oil field that has the wrong plumbing. 
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    Is Tianjin Port closed?

    Image titleTianjin Port, am 20/08/2015.
    Image titleJapanese TV reporting cloud over sea over East China Sea.

    Toyota Motor Corp (7203.T) and rival global automakers are looking to divert shipments to Shanghai and other ports from Tianjin after massive explosions last week disrupted operations indefinitely at China's largest auto import hub.

    Authorities have restricted access to areas affected by the Aug. 12 blasts at a hazardous chemicals warehouse which killed at least 114 people. Automakers are struggling to reach lots and warehouses to assess damage and clear thousands of charred cars to make facilities usable, though the port continues to operate.

    On Wednesday, Renault SA (RENA.PA) and Subaru maker Fuji Heavy Industries Ltd (7270.T) said they would re-route imports to Shanghai, while Hyundai Motor Co (005380.KS) said it would send further shipments to Shanghai and Guangzhou.

    Toyota is considering re-routing imports to Shanghai and Dalian which have enough capacity to prevent any significant logistical problems, a senior Beijing-based executive said.

    "Port of Tianjin will likely be unusable for a long while, although I have no idea at the moment how long these disruptions would last," said the executive, who was not authorised to speak with media on the matter and so declined to be identified.

    Toyota suspended its two final assembly lines near Tianjin port on Monday to Wednesday, partly to assess any damage. It made 432,340 cars at the plants last year, and is likely to lose 2,200 a day due to the blasts, said researcher IHS Automotive.

    A Toyota spokesman in Japan said, without elaborating, that the automaker was looking to re-route shipments to other ports.


    Tianjin, regarded as a gateway to China's industrial northeast, handles 40 percent of car imports in the world's biggest auto market. But the explosions are likely to hamper normal operations for at least a couple of months, said IHS.

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    Iron explorer sells eggs as Australia goes from mining to dining

    Iron explorer sells eggs as Australia goes from mining to dining

    The iron-ore business is so lousy that one Canadian mining company is shelving its biggest project and starting a new venture: selling Australian eggs to China.

    The abrupt shift at Century Iron Mines Corp. was prompted by a global iron-ore surplus that sent prices plunging 68 percent in four years. Chief Executive Officer Sandy Chim doesn’t expect a recovery until 2018, so he’s taken a cue from Australian mining billionaires Gina Rinehart and Andrew Forrest, who are expanding into food production as demand rises across Asia.

    “Australia is going from mining to dining,” Chim said by telephone from Toronto, where the company created a unit called Century Food. The plan is to distribute eggs produced by Sunny Queen Pty., a chicken-farmer cooperative in Queensland, to consumers in Hong Kong and Macau.

    With the backing of Wuhan Iron & Steel Corp. and China Minmetals Corp., the government-owned companies that own 30 percent of Century Iron Mines, Chim is investing C$2 million ($1.5 million) in the egg venture. He’s drawing on capital originally intended for Century’s flagship Joyce Lake mine project straddling the Canadian provinces of Quebec, and Newfoundland and Labrador.

    As recently as November, after tests indicated 24.3 million metric tons of reserves, Century was expecting to spend C$250 million on development and start production in 2017. But iron ore went from bad to worse as producers like Rio Tinto Group, Vale SA and BHP Billiton Ltd. expanded output from lower-cost mines. At the same time, demand slowed from steelmakers in China, who use about 70 percent of output.

    “Sometimes it is a question of survival,” Meyer said. Mining entrepreneurs “are good at following the money and not patient enough to wait for the cycle to turn,” he said.

    Century isn’t alone. In January, All Ore Mineracao SA in Brazil said it would abandon projects in iron ore and gold to produce cosmetics. All Ore’s shares surged as much as 70 percent on the news, and the company became Sweet Cosmetics SA.

    “We are going to sit on it and wait until the market comes back,” Chim said. For now, Chim’s bet on the appetite for eggs in China is mimicking ventures by two iron-ore billionaires. Andrew Forrest last year acquired Harvey Beef in Australia to export meat to China. Gina Rinehart, the richest woman in Australia, last year bought stakes in two ranches and invested A$500 million ($367 million) in supplying infant formula to China.

    As incomes rise, Chinese consumers are eating more meat and protein, according to Bloomberg Intelligence and the U.S. Department of Agriculture. Demand for imports also is growing after trust in domestic food supplies was undermined by scandals involving tainted products.

    In addition to shelled eggs, Century plans to distribute Sunny Queen products including ready-made omelets, poached and scrambled eggs. Century also may expand into other foods, Chim said.

    “As a supplier of commodities to China from the rest of the world, we see this as a logical extension because of our networks and talent there,” Chim said.

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    China’s energy guzzlers Jan-Jul power use down 2pct on yr

    China’s energy guzzlers Jan-Jul power use down 2pct on yr

    Power consumption of China’s four energy-intensive industries dropped 2% on year to 962.4 TWh over January-July this year, accounting for 30.4% of the nation’s total power consumption, the China Electricity Council (CEC) said on August 19.

    Of this, the ferrous metallurgy industry consumed 294.3 TWh of electricity over January-July, down 7.4% year on year, compared to the growth of 2.2% from the previous year; while the non-ferrous metallurgy industry used 250.8 TWh of electricity, up 4.6% year on year, unchanged from the year-ago growth.

    The chemical industries consumed 243.5 TWh of electricity over January-July, up 2.3% year on year, lower than a 0.6% growth a year ago; while power consumption of building materials industry dropped 6.7% year on year to 173.8 TWh, compared to a 8.7% rise in the preceding year.

    In July, the four industries consumed a total 143.2 TWh of electricity, down 4.9% year on year, accounting for 28.4% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 42.9 TWh of electricity in July, dropping 12.4% on year and down 3.16% on month; while the non-ferrous metallurgy industry used 36.4 TWh of electricity, up 1.3% from a year ago but down 2.93% on month.

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    It ain't over until the fat lady sings.


    It ain't over till the fat lady sings

    From Wikipedia, the free encyclopedia
    Amalie Mater 

    It ain't over till (or untilthe fat lady sings is a colloquialism. It means that one should not presume to know the outcome of an event which is still in progress. More specifically, the phrase is used when a situation is (or appears to be) nearing its conclusion. It cautions against assuming that the current state of an event is irreversible and clearly determines how or when the event will end. The phrase is most commonly used in association with organized competitions, particularly sports.

    The phrase is generally understood to be referencing the stereotypically overweight sopranos of the opera. The imagery of Richard Wagner's opera cycle Der Ring des Nibelungen and its last part,Götterdämmerung, is typically the one used in depictions accompanying reference to the phrase. The "fat lady" is the valkyrie Brünnhilde, who is traditionally presented as a very buxom lady withhorned helmetspear and round shield (although Brünnhilde in fact wears a winged helmet[citation needed]). Her aria lasts almost twenty minutes and leads directly to the end of the opera.[1] AsGötterdämmerung is about the end of the world (or at least the world of the Norse gods), in a very significant way "it is [all] over when the fat lady sings."


    The first recorded use appeared in the Dallas Morning News on 10 March 1976, by journalist Ralph Carpenter:[2]

    Despite his obvious allegiance to the Red RaidersTexas Tech sports information director Ralph Carpenter was the picture of professional objectivity when the Aggies rallied for a 72–72 tie late in the SWC tournament finals. "Hey, Ralph," said Bill Morgan, "this... is going to be a tight one after all." "Right", said Ralph, "the opera ain’t over until the fat lady sings."

    In the same newspaper on 26 November 2006, Steve Blow followed up the discovery by contacting Bill Morgan about the incident:[3]

    "Bill vividly remembers the comment and the uproar it caused throughout the press box. He always assumed it was coined on the spot. 'Oh, yeah, it was vintage Carpenter. He was one of the world’s funniest guys,' said Bill, a contender for that title himself."

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    Glencore First-Half Profit Drops 56% on Commodity-Price Rout

    Glencore First-Half Profit Drops 56% on Commodity-Price Rout

    Glencore Plc, the commodity trader and miner headed by billionaire Ivan Glasenberg, reported a 56 percent slump in first-half profit as its trading unit failed to offset a Chinese-led drop in raw-material prices.

    Adjusted net income declined to $882 million from $2.01 billion a year ago, the Baar, Switzerland-based company said on Wednesday. That beat the $711 million average of seven analyst estimates compiled by Bloomberg. The company, which will pay a dividend of 6 cents a share, cut its full-year forecast for trading profit.

    The world’s biggest natural resources companies are battling a slump in commodity prices that’s left copper and oil near six-year lows as China’s economy expands at the slowest pace in a quarter of a century. Glasenberg said in an interview that nobody can read the Chinese economy right now.

    In previous years, Glencore had cushioned the impact of lower commodity prices through its trading business, the world’s largest at a public company. However, in the first half, trading was weak due to what the trading house said was a “collapse” in the premiums that traders are able to charge clients for the delivery of metals such as aluminum and nickel.

    Adjusted earnings before interest and tax from its trading business, which includes the sale of commodities from crude to cotton, fell to $1.07 billion. That compares with the $1.28 billion average estimate of nine analysts surveyed by Bloomberg News.

    The company cut its full-year Ebit forecast for the trading business to $2.5 billion to $2.6 billion, down from $2.7 billion to $3.7 billion it announced in December.

    After writing down the value of assets, Glencore reported a net loss of $676 million, compared with a profit of $1.72 billion a year earlier.

    Capital Spending

    Glencore is defending its coveted investment-grade credit rating and dividends by lowering expenditure and selling some assets.

    The company last week said it’s trimming this year’s spending plan by as much as $800 million to no more than $6 billion and selling $290 million of mines. In addition, on Wednesday it said its capital investment next year will be capped at $5 billion.

    The company cut its net debt by $982 million in the first half to $29.6 billion, more than what analysts had expected. It impaired the value of its oil assets in Chad by $792 million after paying $1.35 billion last year for them.
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    China investigates top work safety regulator after Tianjin blasts

    China investigates top work safety regulator after Tianjin blasts

    China said on Tuesday it is investigating the head of its work safety regulator who for years allowed companies to operate without a license for dangerous chemicals, days after blasts in a port warehouse storing such material killed 114 people.

    Yang Dongliang, head of the State Administration of Work Safety, is "currently undergoing investigation" for suspected violations of party discipline and the law, China's anti-graft watchdog said in a statement on its website.

    The agency, the Central Commission for Discipline Inspection, did not say that Yang's behaviour was connected to the explosions in the port of Tianjin but the company that operated the chemical warehouse that blew up did not have a licence to work with such dangerous materials for more than a year.

    Investigators have not determined the cause of the blasts but the disaster has deepened public concern about safety regulations.

    China has struggled in recent years with incidents ranging from mining disasters to factory fires, and President Xi Jinping has vowed that authorities should learn the lessons paid for with blood.

    The People's Daily, the ruling Communist Party's official newspaper, said last week warehouse owner Tianjin Dongjiang Port Ruihai International Logistics had operated without a licence to work with dangerous chemicals because of an administrative loophole.

    Reuters could not verify that report but the company did not have any form of certification, including a licence to handle dangerous goods, between October 2014 and June 2015, according to its records on the State Administration for Industry and Commerce (SAIC) website.
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    China home prices rise for third month in July

    China home prices rise for third month in July

    Chinese home prices rose for a third consecutive month in July, fuelled by a pick-up in sales and market sentiment, a rare counterpoint to a growing list of grim indicators in the world's second-largest economy.

    Average new home prices rose 0.3 percent in July versus June, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Tuesday, slightly slower than June's 0.4 percent rise.

    Even a modest recovery in a sector that accounts for around 15 percent of GDP is a welcome boost for an economy heading for its weakest growth in 25 years.

    Property sales bottomed out during the first half of 2015 after declining for more than a year, propped up by a barrage of government support measures since last September, including a series of interest rate cuts and lower downpayment requirements.

    Exports have tumbled, investment growth has hit repeated lows, and the stock market crashed 30 percent in a matter of weeks, keeping policymakers busy with an unprecedented array of support measures, including a currency devaluation and repeated attempts to increase lending.

    Some of those measures, along with gains made on stocks in a 150 percent run-up in the year before the crash, have helped buyers like Lilian Liu, a 33-year-old worker in the tourist industry, who purchased a second home in the eastern city of Hangzhou last month.

    "It's the policy that makes it possible to buy my second apartment. Without lower down-payments, I couldn't make the decision this time," she said.

    While policy measures and increased lending helped fuel a wave of pent-up home buying in recent months, a huge overhang of unsold houses in smaller cities keeps the sector under pressure.

    China's overall real estate investment growth continued to slow in the first seven months of 2015, but property sales and housing investment improved.

    Compared with a year ago, home prices still fell 3.7 percent in July, easing from the previous month's 4.9 percent drop, Reuters calculated from NBS data showed.

    China Vanke, the country's largest property developer, said on Monday that the housing market was slowly emerging from a year-long slump, but it would take time to see a full recovery.

    "The number of land acquisitions has decreased, and inventory is slowly being digested. It'll take time, but it's confirmed that a recovery is ongoing," said Vanke President Yu Liang.

    The NBS data showed home prices across China rose month-on-month in 31 of the 70 major cities monitored, up from 27 in June.

    Prices in first-tier cities such as Beijing, Shanghai and Shenzhen have been leading the recovery.
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    Yesterdays daily was the most read ever in our history.

    Image title
    This is the Bloomberg commodity index, which is breaking to new lows.
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    Empire Fed Collapses To Six Year Lows

    Empire Fed Collapses To Six Year Lows 

    Having 'stabilized' in recent months, The Empire Fed Manufacturing Survey just collapsed to -14.92 (from 3.86) missing expectations of 4.50 by the biggest margin since 2010. Across the board it was a bloodbath with New Orders crashing, inventories plunging and employment lower (with both workweek and number of employees falling). The headline data would have been worse were it not for the concurrent spike in 'hope' - highest since April.

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    China tries senior power industry executive on graft charges

    China tries senior power industry executive on graft charges

    The former chief executive and chairman of China Resources Power Holdings Co. Ltd. is being tried on allegations of graft, Chinese authorities said on Monday.

    Wang Yujun was put on trial on Aug. 12 in Zhenjiang, a city in the eastern province of Jiangsu, the country's procuratorate said in a statement on its website (

    Wang is accused of seeking profit for others, illegally accepting other people's assets, and embezzling public money using his various official roles.

    The statement did not say when a verdict would be issued.

    China Resources Power Holdings is one of the listed units of state-owned China Resources Holdings, a conglomerate of energy, land and consumer businesses in mainland China and Hong Kong.

    An investigation into the conglomerate has ensnared at least seven senior executives, including the chairman Song Lin.

    Chinese President Xi Jinping has pursued an extensive campaign against corruption since taking power more than two years ago.

    Xi, like others before him, warned that the problem was so severe it could affect the party's ability to maintain its grip on power.
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    The Killing Zone.

    Image titleImage title
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    The Good News.

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    Is Glencore about to dump $16 billion of stockpiles?

    Is Glencore about to dump $16 billion of stockpiles?

    A new research note from JP Morgan Cazenove quoted in The Guardian warns that Glencore's debt – estimated to come in at a stomach churning $48 billion when the company reports half-year numbers next week – as the biggest issue facing the company.

    "Bold borrowings aren’t quite what they seem, it should be said, because Glencore’s marketing division holds a stockpile of commodities as inventories that can be turned into cash. Viewed that way, net debt might be nearer $30.5bn at year-end, estimates JP Morgan Cazenove.

    "But here’s the rub: Glencore might have to go ahead and turn some of that stock into cash if its wants to save its BBB credit rating. “At spot commodity prices, we calculate net debt needs to fall $16bn by year-end 2016 to safeguard Glencore’s BBB credit rating,” says JP Morgan.

    "Preservation of BBB is a financial priority, Glencore said in March, for the sound reason that a healthy rating is vital to keep funding costs low in the trading-cum-marketing division."

    Glencore has other ways to find some of that $16 billion in cash like nixing its dividend. But any large seller into an already depressed metals and minerals market can only make things worse.
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    Yuan China blows up!


    China's move to weaken the yuan last week could head off further similar "adjustments", and the yuan is likely to move in both directions as the economy stabilizes, Ma Jun, chief economist at the central bank said on Sunday.

    The People's Bank of China (PBOC) shocked global markets by devaluing the yuanCNY=CFXS by nearly 2 percent on Aug. 11. The PBOC called it a free-market reform but some saw it as the start of a long-term yuan depreciation to spur exports.

    The yuan's drop last week and its increased flexibility could help "sharply reduce the possibility" of similar adjustments in future, Ma said.

    In the near term, it is more likely there will be "two way volatility," or appreciation and depreciation of the yuan, Ma said in a question-and-answer statement sent by email.

    The central bank would move only in "exceptional circumstances" to iron out "excessive volatility" in the exchange rate, Ma said.

    Ma played down market fears that a "currency war" could be triggered by China's devaluation, which dragged some other Asian currencies to multi-year lows.

    "China has no intention or need to participate in a 'currency war'," Ma said in the statement.


    The death toll in China from explosions at a warehouse storing hazardous materials rose to 112 Sunday, as authorities worked to remove chemical contamination.

    Some 95 people, including 85 firefighters, remain missing following the blasts Wednesday night in the port city of Tianjin, 75 miles east of Beijing, the state-run Xinhua News Agency reported.

    State-run news publications The Paper and the Southern Metropolis reported that the warehouse was storing 700 tons of sodium cyanide — 70 times more than it should have been.

    Sodium cyanide is a toxic chemical that can form a flammable gas upon contact with water, and several hundred tons would be a clear violation of rules cited by state media that the warehouse could store no more than 10 tons at a time, the Associated Press reported.

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    The Real Time Economy

    Image title

    Some 250 miles above the Earth, a flock of shoebox-size Dove satellites is helping to change our understanding of economic life below.

    In Myanmar, night lights indicate slower growth than World Bank estimates. In Kenya, photos of homes with metal roofs can show transition from poverty. In China, trucks in factory parking lots can indicate industrial output.

    Images from these and other satellites, combined with big-data software, are helping to create what former NASA scientist James Crawford calls a “macroscope” to “see things that are too large to be taken in by the human eye.” Aid organizations can use the results to distribute donations. Investors can mine them to pick stocks.

    “This is one of those really rare game changers that come along very infrequently but has the ability to remake the whole stock- and economic-research industry,” said Nicholas Colas, chief market strategist at Convergex Group, a New York-based brokerage. “We still make monetary policy in this country based on surveys of a few thousand households and businesses.”

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    The Emerging Middle Class is not happy.

    Image titleHere's the emerging middle class, from 2000-2012, if you like the classic period of emerging catch up.Image titleAnother graph showing the same effect.
    Image titleThis slide shows the classic, easy to understand, 'catch up' slide for the emerging economies: growth at OECD's expense, via low wage manufacturing job replacements.
    Image titleThe problem for emerging, and its actually two fold, is 1> dependence on commodity exports for income, 2> Maturity and mix effects:

    Image titleTaking China as a superb example: Miners and Steelworkers simply do not have the 'earnings power' to drive wage growth higher. 
    Image titleHere's coal power installs in 2010: BIG!

    Image titleHere's the IEA on coal today, according to the IEA we are quite literally at peak coal usage NOW. The emerging middle class hates pollution. 

    There's a stunning silence on the web about the emerging middle class travails, but I did find this blog from the OECD in 2013:

    Yet, the urban middle class youth is in revolt in Brazil, Turkey and other fast-growing countries. The controversy around Easterlin Paradox, a key concept of happiness economics, suggests that happiness grows more slowly than incomes. Leaders in many emerging countries are today confronted with a dilemma that reflects the dual rural-urban structure of their large societies. While the internet-savvy young urban middle-class has left poverty behind and demands voice, participation and efficient public services, there still coexist the poor in the rural hinterland striving to leave individual poverty behind.  

    Exit, voice and loyalty, the late Albert O Hirschman´s intriguing basic categories that drive societal change, can be used to better understand the current conundrum. Loyalty, through adherence to a political party or to religion, can block change but is waning. Exit and voice have different potential in a rural-urban context: exit from the rural to the urban sector is a preferred option for the rural poor but is mostly a one-way street; whence voice as the preferred option for the urban middle class.

    Much of the emerging-country middle class is fragile. Lousy education, poor health and urban congestion are the biggest risks to the lower strata of the middle class, by way of social and economic exclusion. A higher proportion of middle-class citizens translates into higher prices for private schools, hospitals and transports or, alternatively, overcrowding. The private provision of quality public services is a socially dividing, hence limited, costly option. In other words, exit to private education and health services – an option for the “happy few” – will raise prices to the point that it triggers voice while the size of the middle class rises.

    “First-world soccer stadiums; third-world schools and hospitals”, was one of the slogans advanced by Brazil´s protesters. Brazil has already spent more than $3bn, three times South Africa’s total four years earlier, and only half the World Cup stadiums are finished. Public health spending occupies a mere 4 per cent of GDP in Brazil (despite a constitutional declaration for universal health care rights), compared to 6 in Turkey and 7 in the OECD on average. The latest PISA test scores rank Brazil 57th out of 65 survey countries for mathematics, Turkey is ranked 43rd. These numbers suggest that there is a political and social premium on best practices in the governance and allocation of public spending of tax receipts. Apparently, that premium has not been reached.

    Emerging-country leaders might ignore the insights of the OECD Latin American Outlook 2011 at their peril. The policy recommendations put forth there rightly emphasize the need for “fiscal legitimacy”. To avoid the emerging middle class blues, public finances need to strengthen the social contract, provide better opportunities for the vulnerable people and better quality public services. Middle-income citizens are more willing to pay taxes for services, such as transport, health care and education, if they perceive them to be of high quality and if “white elephants” – trophy public investments with little social value – are avoided.

    Coca Cola reported unit volumes of 2% in Latin America, 3% in Asia, 4% in Eurasia/Africa in q2 2015, which adds some numbers to our sense of emerging middle class woes.

    Global car sales advanced a slower-than-expected 2% in the first half of 2015, 

    Here's a familiar narrative from the Philippines:

    Grace Poe’s emergence as a potential “third force” in Philippine politics has led many commentators to ask if something fundamentally new may be emerging this presidential season: a major candidate who is neither backed by the administration nor is seen to lead the opposition to it.

    But a look back at previous post-Marcos elections suggests a very different interpretation is more plausible.

    Poe, like all major presidential contenders, has aligned herself with one of the two major “narratives” of Philippine politics, that of “reformism” or “good governance” carried out by “moral leaders.”

    She is seemingly aligned against a “populist” narrative of helping the poor against an uncaring elite that Vice President Jejomar “Jojo” Binay has made his own following in the footsteps of former president Joseph Estrada. (READ: Battle of Aquino, Binay narratives)

    Thus it is not surprising that Poe has won strong support from the middle and upper classes while basking in the favorable publicity provided by the press. In the same manner, Binay enjoys a core support of the poor while being denounced as corrupt by many key elites.

    This follows a now familiar story of non-establishment candidates making the running in emerging democracies. 

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    Greenpeace on GHG's and Renewables.

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    Disruptive technologies

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    The Elephant in the room

    Image titleWe know 'resourceworld' is entering crisis, but 'internetworld' just keeps going.
    Image titleOnly 4% of US readers use paper. This is just apocalyptic it it is any measure of future resource demand.
    Image titleSmartphones are ubiquitous and increasingly the main access point between the consumer and the economy. That means that over time more and more stuff is going to be bought/consumed via a smartphone. We cannot blithely assume that patterns of consumption of raw materials will remain unchanged with this transition.
    Image titleThis is the new economy, its 'on demand' and available 24/7. Its where the growth is to be found right now. As a general observation this raises the utilisation rate of formerly dormant capital stock (cars/housing/hotels/'stuff'), and as a consequence lowers the rate of formation of new capital stock. Thats not good for capex in general. It's excellent for economic efficiency, but a disaster for resource intensity. 
    Image titleClose to a trillion dollars of 'stuff' now moving across internet platforms. That's still only ~5% of global GNP. What happens when the other 95% joins the party? 
    Image titleThere's not one quoted EU company in the top 20. It's striking. 

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    EU on Recycling

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    London Property vs Global Growth

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    Oil and Gas

    North Sea helicopter pilots support strike action

    North Sea helicopter pilots support strike action

    Offshore Energy Today reported Monday that BALPA, the British Airline Pilots Association, had called its helicopter pilots operating in the North Sea for aballot on strike action.

    The ballot was closed on Tuesday, August 18, 2015. According to BALPA’s press release, North Sea Helicopter Pilots have indicated strong support for strike action if helicopter companies do not make serious improvements in the way they deal with job losses.

    They have also highlighted the serious impact on safety the threat of redundancy is having, the association said.

    In the survey conducted by BALPA, pilots accepted the downturn in the industry meant jobs would go, but were frustrated at the way management are going about it, BALPA added.

    The association also added that pilots want the helicopter companies to improve voluntary redundancy arrangements to try and prevent as many compulsory job losses as possible. And they believe the companies are not valuing the experience of senior pilots highly enough in deciding who may need to be made redundant.

    “BALPA will do all it can to protect pilots who are feeling the brunt of the downturn in the North Sea oil industry.”

    BALPA General Secretary, Jim McAuslan, said: “We are not being unreasonable. We know the downturn in the North Sea is going to hit jobs, but the way the companies are going about it is causing massive frustration, borne out by the very high turnout and strong ‘yes’ vote in this ballot conducted over just four days.

    “In the event management do not substantially shift their position BALPA’s National Executive Council will be meeting early next month to consider a move to a formal strike vote, something we are still hoping to avoid.”

    According to BALPA, a strong and worrying message from the survey was concern over safety. Pilots reported that the threat hanging over them, their families and their colleagues, was having serious unintended effects on their ability to sleep and concentrate, the association emphasized.

    One pilot commented: “Crews are concerned and distracted and this is reflected in an increase of mistakes and lack of awareness. The threat of being ‘at risk’ is dominating the mindset of the majority of our pilots.”
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    Aubrey McClendon pursuing $100 million deal for drilling rights in Australia

    Aubrey McClendon pursuing $100 million deal for drilling rights in Australia

    U.S. shale gas explorer Aubrey McClendon is negotiating a $100 million acquisition of Australian drilling rights in a move that marks the former Chesapeake Energy Corp. chief’s first foray overseas.

    McClendon’s American Energy Partners LP signed a letter of intent and a three-month exclusivity agreement with Armour Energy Ltd. to acquire a 75 percent stake in 21.5 million acres of drilling rights, Brisbane, Australia-based Armour said in a statement on Thursday. Armour rose the most in three years.

    Terms of the preliminary deal require American Energy to pay Armour as much as $18 million in signing bonuses and to spend $100 million on oil and natural gas drilling over five years. American Energy also has the option to acquire a 5 percent stake in Armour and a seat on the board of directors, according to the statement.

    Work on the project should begin by May, Armour Chief Executive Officer Robbert de Weijer said in a phone interview. Separately, the company is seeking buyers for a stake in 7.8 million acres it holds in the same region, he said. Armour soared 49 percent to 7 Australian cents in Sydney.

    The deal “vindicates Armour’s view that the McArthur Basin represents one of the worlds great opportunities for the discovery of a new frontier oil and gas province,” Nicholas Mather, Armour’s executive chairman, said in the statement.

    McClendon, who co-founded Chesapeake in 1989 and built it into a U.S. gas titan before his ouster in a 2013 investor revolt, is showing confidence in Australian shale even asmajor international explorers such as Chevron Corp., ConocoPhillips and Statoil ASA have abandoned projects.

    Northern Territory

    John Raymond’s Energy & Minerals Group private equity firm, a key backers of McClendon’s post-Chesapeake activities, last week agreed to acquire an 18 percent stake in Australian shale rights held by closely-held Pangaea Resources Pty. McClendon and Raymond are investing in the county’s Northern Territory region.

    In his home country, McClendon’s efforts to build a new shale empire since his forced departure from Chesapeake have foundered. American Energy has struggled under low energy prices and heavy debts incurred to amass a portfolio that stretches from the Great Plains to Appalachia.

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    Frackers turn to toilet water in drought-prone Texas

    Frackers turn to toilet water in drought-prone Texas

    Top shale oil producer Pioneer Natural Resources Co has found an unusual way to both save water and cut costs for its wells: tapping the treated runoff from toilets, sinks and showers in west Texas.

    Pioneer has signed an 11-year, $117 million deal with the city of Odessa, Texas that will guarantee it access to millions of gallons of treated municipal wastewater each day, for use in nearby oilfields. Deliveries of the so-called effluent, are expected to start at the end of the year.

    As crude oil has slid to its lowest level in six years -currently about $40 a barrel - oil and gas companies pumping from shale rock have tried to cut every unnecessary penny from their operations. Water acquisition and transportation can be up to 10 percent of the cost of drilling and fracking a well, according to consulting firm IHS.

    Producers are also trying to mitigate long-term risks of water scarcity in the arid Permian Basin of West Texas, where the top U.S. oilfield is situated.

    Oil and gas companies operating in area, including Pioneer and Apache Corp, have long sought cheaper, more environmentally sound sources of water to use for fracking.

    For example, both companies have drawn some of the water they use in their operations from the Permian's brackish aquifers, which contain water unfit for drinking. Both companies also have worked to recycle water that is used for frack jobs or found in the ground while drilling.

    Pioneer is the first oil and gas company to sign a long-term wastewater supply contract with Odessa, a city of about 110,000 people. The Dallas-based company recently began construction on a pipeline network that will transport the treated water from the city's sewage plant to one of its oilfields about 20 miles away.

    The municipal reclaimed water the company intends to use comes from sewage plants that treat human waste and water from activities that include bathing and food preparation, according to Texas regulators.

    EOG Resources Inc, which has wells in the Eagle Ford formation in South Texas, is considering using water from wastewater treatment plants, according to its web site. And Anadarko Petroleum Corp uses treated water purchased from the city of Aurora in Colorado, according to a spokesman.
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    Santos puts itself on the block, stock recovers from 12-year low

    Santos puts itself on the block, stock recovers from 12-year low

    Australia's Santos Ltd put its assets on the block after being approached by unnamed parties and moved to replace its chief executive, just as its flagship $18.5 billion Gladstone liquefied natural gas project is set to start up.

    Santos on Friday appointed Peter Coates as executive chairman following a one-third slide in its share price this year, and said it was looking for a successor for Managing Director David Knox.

    Coates will lead a strategic review, with Deutsche Bank and Lazard advising, with Santos saying parties had expressed interest in some of its assets and "strategic initiatives".

    The company said it expected more interest after Friday's announcement.

    "No options will be ruled out from consideration," Coates said in a statement.

    Knox declined to comment on any of the approaches and gave no deadline for Coates' review, but said it was urgent, given the impact of falling oil prices on Santos' shares.

    Santos has been under pressure to shore up its balance sheet since oil prices began sliding last year and has opted to slash costs and rather than sell new shares to boost its funding, spooking investors.

    Its net debt of A$8.8 billion is now well above its A$5.7 billion market value.

    "The investment thesis for Santos is based on higher oil prices. I can place that bet with lower risk through other vehicles, given the significant amount of debt they've got and that equity holders take on the losses if the strategy is wrong," said Paul Phillips, a partner at Perennial Growth Management.

    Santos had been counting on output from its share of the Papua New Guinea LNG project, which began exporting last year, and a late-September start-up for the Gladstone LNG project to boost its coffers, but weak oil-linked LNG prices have hammered earnings.

    On Friday it reported a worse-than-expected 88 percent slide in underlying net profit for the six months to June to A$32 million ($23 million).

    It cut its interim dividend by a quarter to 15 cents a share.

    Gladstone LNG is one of the world's first three coal seam gas-to-LNG projects, all in Australia's Queensland state and all starting up just as oil prices have sunk to 6-1/2 year lows.

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    Ecopetrol creates new free trade zone conduct offshore operations

    Ecopetrol creates new free trade zone conduct offshore operations

    The Board of Directors of Ecopetrol S.A.  in its meeting held on August 14, 2015, authorized the creation of a Colombian company indirectly wholly owned by Ecopetrol S.A.

    The creation of the new subsidiary seeks to develop offshore activities in Colombia, which the company currently carries out as operator and non-operator, and take advantage of the benefits of Decree 2682/14, 'pursuant to which the conditions and requirements are established for declaring the existence of Permanent Offshore Free Trade Zones'.

    Once the new company is created, the ANH's approval will be sought in order to assign Ecopetrol S.A.'s contractual rights under the exploration and production contracts of the offshore blocks in which it is operator and non-operator.

    Ecopetrol is the largest company in Colombia and is an integrated oil and gas company; it is among the top 40 oil companies in the world and among the top four oil companies in Latin America.
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    Kogas July sales down 20 pct

    Kogas July sales down 20 pct

    Kogas of South Korea, the world’s largest corporate buyer of LNG, said its sales volume totaled 1.90 million mt in July, a drop of 20 percent as compared to the same month last year.

    Gas sales into the power sector were at 1.01 million mt, down 26.8 percent when compared to July in 2014, Kogas said in a filling to the stock exchange.

    The company’s city gas sales dropped 10.6 percent on year to 887,000 mt.

    Kogas imported 16.54 million mt of LNG in the first half of 2015, down 17.1 percent as compared to the previous year.
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    U.S. drivers log 3.9 pct more miles in June vs year ago-DOT

    U.S. drivers log 3.9 pct more miles in June vs year ago-DOT

    The number of miles driven on U.S. roads and streets rose 3.9 percent in June from a year ago, according to government data released on Thursday, highlighting a pickup in driving activity that is pushing gasoline use toward a new record.

    Americans logged an estimated 275.1 billion miles on U.S. roads in June, 3.9 percent more than June last year, the largest year-on-year growth rate since January, according to data released by the Federal Highway Administration. Year to date, miles driven are up 3.5 percent from 2015, the data showed.
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    Private Equity firm invests up to $400million in UK-based Zennor Petroleum

    Private Equity firm invests up to $400million in UK-based Zennor Petroleum

    UK exploration firm Zennor Petroleum (previously named MPX) could receive up $400million in funding from a private equity firm

    Kerogen Capital cited Zennor’s track record, asset base, reduced operating costs in the North Sea and an improved UK fiscal regime as reasons for investing.

    The private equity fund manager is focussed on the international oil and gas sector with approximately US$1.6 billion in invested and committed capital.

    Founded in 2006, Zennor, is a private exploration and production company based in Guildford, England.

    Kerogen has made an initial commitment of US$100 million in Zennor, but said it may commit, with its limited partners, up to $400million to Zennor.

    Proceeds from Kerogen’s initial investment will be used to fund the development of Zennor’s existing assets and expand the portfolio by way of new acquisitions, farm-ins and licensing rounds.

    Kerogen will become the majority shareholder alongside Zennor management.

    Zennor’s management team, led by Martin Rowe, Rod Crawford and James Henry, have technical and commercial experience in the UK North Sea.

    The technical team worked together previously at ARCO (now BP) and a number of independents, culminating in their current roles at Zennor.

    Zennor has an existing portfolio of licences including a 100% interest in the Finlaggan gas-condensate discovery in the Central North Sea.

    Finlaggan is described as “an attractive low cost conventional appraisal and development project”, and underpins Kerogen’s investment in Zennor.

    Kerogen co-Founder and managing partner, Jason Cheng, said: “Kerogen is attracted to the UK North Sea given recent market dynamics, combining attractive pricing for assets, substantial reductions in operating cost structures, and an increasingly favourable fiscal environment.”

    “Zennor is an excellent entrepreneurial group poised to take advantage of the current window of opportunity in the North Sea, particularly with the team’s deep technical and operating experience.”

    Zennor managing director, Martin Rowe, said: “We are delighted to be working alongside Kerogen in seeking to grow our upstream business in Northern Europe.
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    Mexico hedges 2016 oil exports at average of $49 per barrel

    Mexico hedges 2016 oil exports at average of $49 per barrel

    Mexico’s government hedged oil exports for next year at an average $49 a barrel, locking in protection against low crude prices, the nation’s Finance Ministry said.

    Mexico spent $1.09 billion for the put options, giving it the right to sell 212 million barrels at the hedged prices, the ministry said Thursday on its website. That’s more than the $773 million Mexico spent last year on hedging, reflecting the almost 60 percent slump in the oil price over the past year.

    The ministry said the options, purchased in 44 transactions from June 9 to Aug. 14, will cover the portion of next year’s budget that’s vulnerable to lower crude prices. The government is due to send its full budget proposal to Congress by Sept. 8. Mexico traditionally implements its hedge later in the year, often finishing as late as November.

    The price Mexico negotiated for 2016 is 36 percent lower than the $76.40 a barrel hedge obtained for this year. Still, $49 a barrel is higher than current market prices for next year. The West Texas Intermediate 2016 calendar swap, which reflects the average price U.S. crude oil for next year, stood at $47.86 a barrel on Thursday.

    Mexico’s hedging program has often roiled energy markets since its introduction in the early 1990s as banks acting on behalf of the country sell futures to cover their own options positions.

    Mexico engaged Morgan Stanley, Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. among others to implement the hedge, people with knowledge of the program said last month.

    Finance Minister Luis Videgaray said in April that the country planned to hedge exports for 2016, after locking in prices for annual sales of about 200 million barrels over the past several years.

    “Certainly, it will not be a hedge at the price we were able to get for this year’s hedge, but we’ll take what the market gives us,” Videgaray said in an interview at the time.

    The Mexican government, which depends on oil for about a third of its revenue, is set to profit from the 2015 hedge. The average price this year for Mexico’s main oil export is $48.9 a barrel, more than a third below the $76.4 at which it hedged.

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    Premier Oil’s cash flow up as industry “resets”

    Premier Oil’s cash flow up as industry “resets”

    A strong North Sea performance saw Premier Oil’s cash flow rise for the first half of the year.

    The firm reported an operating cash flow of $510million – up from last year’s $499.4million.

    Chairman Mike Welton said: “The UK delivered a strong production performance while at the same time operating costs have been reduced significantly, helped by the disposal of the high-cost Scott area in 2014.”

    Premier UK managed to reduce operating costs from $35/boe to $29/boe.

    Despite restricted production for the first quarter of the year, Premier’s Huntington field’s facilities production uptime in the last four months exceeded 90%. The asset averaged 6.2kboepd for the first six months.

    The firm confirmed its Solan project was still in line for first production in the final quarter of this year.

    “Offshore productivity has improved markedly on our operated Solan project and we now have increased confidence around our targeted fourth quarter first oil date,” Welton said.

    “Development drilling and subsea installation work has commenced on schedule for our Catcher project. While progress in the construction of the FPSO hull has been slower than planned, our team, together with our FPSO contractor BW Offshore, are putting in place the appropriate mitigating actions. The project remains on track to come on-stream in 2017.”

    Heightened cost pressures had forced to industry to reset its price strategy, according to the company leader.

    “For our part, we have continued to capture sustainable savings in our operating costs, to defer discretionary capex and to actively manage our portfolio.

    “The weakness in the oil price post period-end serves as an important reminder that we must sustain these efforts. We remain focused on managing our balance sheet while achieving the highest level of operational and safety performance and maintaining optionality in the portfolio for future growth.”

    A “weakened” backlog of work for service firms has seen Premier reconsider development plans.

    Earlier this year, the firm delayed the submission of its development plan for its Norwegian Vette project. The firm has since re-engaged with the supply chain in a bid to drive costs down.

    Overall production for the firm averaged 60.4kboepd – a slight decrease on last year’s 64.9kboepd.

    Chief executive Tony Durrant added: “First half operating cash flows increased year-on-year driven by reliable production, our hedging programme and operating cost savings of 30%.

    “With Solan on-stream later this year and Catcher in 2017, we expect both growing production and reduced debt levels.

    Premier Oil has agreed to not pay dividends for two years under a renegotiation of agreements with banks and bondholders designed to increase its financial flexibility against a backdrop of sharply lower crude prices.

    The London-listed company, which has net debt of $2 billion and whose operations stretch from the Falkland Islands to Indonesia, had already scrapped dividend payments earlier this year after it slipped into the red on the back of a steep decline in oil prices.
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    Origin Energy flags spending jump, flat earnings; shares skid

    Origin Energy flags spending jump, flat earnings; shares skid

    Origin Energy, Australia's top gas and power retailer, flagged a 44 percent jump in forecast spending on its flagship gas project and flat earnings from its core business this year, sending its shares tumbling to 7-1/2-year lows on Thursday.

    Sydney-based Origin said it would have to spend A$1.8 billion, up from a previous forecast of A$1.25 billion, as its remaining cash contribution for the giant Australia Pacific liquefied natural gas (APLNG) project in Queensland state, which is due to start producing in the December quarter.

    The increased spending is due to lower oil prices, a previously flagged delay in first production and new drilling to maximise throughput at the plant, it said.

    Investors were worried about the impact on Origin's stretched balance sheet with oil-linked LNG prices expected to remain weak, and because investors had expected some growth in the energy markets business, two analysts said.

    "They have a very weak balance sheet," said an analyst with a fund manager which does not own Origin shares due to its high gearing.

    He said the extra injection of funding for APLNG would make what are already slim margins even skinnier in a weak oil market, limiting gains to shareholders who have been waiting for the benefits from the A$25 billion APLNG project to kick in.

    Origin reported a 4 percent fall in underlying profit to A$682 million ($501 million) for the year to June 2015 on Thursday, and held its final dividend steady at 25 cents a share, meeting a promise to pay out at least 50 cents a year.

    The three major credit rating agencies have all downgraded Origin this year, with Moody's the latest following the company's sale of its stake in Contact Energy.

    Origin Managing Director Grant King said the company would focus on debt reduction rather than increasing dividends as long as oil prices remained weak and was confident its A$5.8 billion in debt facilities and cash would be ample.

    "That will not only fund those commitments but ensure we can endure a prolonged period of low oil prices," he told reporters.

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    Saudi oil exports rise by 430,000 bpd in June

    Saudi oil exports rise by 430,000 bpd in June

    Saudi Arabia's crude oil exports rose by 430,000 barrels per day (bpd) in June, while oil used by the country's power sector surged to its highest in almost a year, official data showed on Wednesday.

    Saudi Arabia ramped up its crude production to a record in June, reaffirming its strategy of defending market share and feeding a rise in global as well as domestic demand.

    The world's biggest crude exporter shipped 7.365 million bpd in June, up from 6.935 million bpd in May, figures published by the Joint Organisations Data Initiative (JODI) showed.

    Saudi Arabia burns higher crude volumes to generate power for air-conditioning during the hot summer months. It has also been feeding more crude to domestic refineries as it expands oil product exports, though such plants refined less in June.

    Domestic refineries processed 2.099 million bpd, down from 2.423 million bpd in May, the JODI data showed.

    Crude oil directly burnt by Saudi Arabia to generate power surged to 894,000 bpd in June from 677,000 bpd in May.

    Exports of refined oil products in June fell to 1.008 million bpd, from 1.318 million bpd a month earlier.

    The Kingdom's rapid transition into one of the largest oil refiners adds an extra dimension to global oil markets.

    State oil giant Saudi Aramco has stakes in more than 5 million bpd of refining capacity, at home and abroad, landing it a place among the global leaders in making oil products.

    JODI compiles data supplied by oil-producing members of global bodies including the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC).

    Saudi Arabia's crude production for June stood at 10.564 million bpd, up from 10.333 million bpd in May.The Kingdom told OPEC it trimmed production by 200,000 bpd to 10.36 million bpd in July.

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    Marcellus/Utica Tied to $43.8B in New NE Industrial Projects

    Marcellus/Utica Tied to $43.8B in New NE Industrial Projects

    How much of an impact does Marcellus and Utica Shale drilling (and its associated activities) impact the northeast economically?

    We now have a pretty good idea, thanks to research done by Industrial Info Resources, a research company based in Sugarland, TX.

    Industrial Info is tracking more than $43.8 billion in industrial capital and maintenance projects that are set to kick off from now through 2016 in the Northeastern U.S. and New England. Industrial Info says, “Abundant natural gas from Marcellus Shale wells in Pennsylvania are responsible for much of the activity”
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    BHP goes bargain hunting at US Gulf sale

    BHP goes bargain hunting at US Gulf sale

    Anglo-Australian player BHP Billiton went bargain hunting at the latest US Gulf of Mexico lease sale, taking advantage of the industry downturn to swoop uncontested for more than two dozen deep-water blocks.

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    EIA Us domestic oil production

    EIA US domestic oil production

                                                             This week   Last week   Last year
    Domestic Production '000.................... 9,348          9,395        8,577

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    Summary of Weekly Petroleum Data for the Week Ending August 14, 2015

    Summary of Weekly Petroleum Data for the Week Ending August 14, 2015

    U.S. crude oil refinery inputs averaged about 16.8 million barrels per day during the week ending August 14, 2015, 254,000 barrels per day less than the previous week’s average. Refineries operated at 95.1% of their operable capacity last week. Gasoline production increased slightly last week, averaging over 10.2 million barrels per day. Distillate fuel production decreased last week, averaging about 5.1 million barrels per day.

    U.S. crude oil imports averaged over 8.0 million barrels per day last week, up by 465,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.6 million barrels per day, 0.9% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 869,000 barrels per day. Distillate fuel imports averaged 201,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.6 million barrels from the previous week. At 456.2 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.7 million barrels last week, and are in the middle of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.6 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.1 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 0.8 million barrels last week.

    Total products supplied over the last four-week period averaged 20.5 million barrels per day, up by 2.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.6 million barrels per day, up by 6.5% from the same period last year. Distillate fuel product supplied averaged over 3.7 million barrels per day over the last four weeks, down by 6.6% from the same period last year. Jet fuel product supplied is up 2.2% compared to the same four-week period last year.

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    PIRA: U.S. LNG projects could struggle to recover costs

    PIRA: U.S. LNG projects could struggle to recover costs

    PIRA Energy Group believes that the return of Japanese nuclear capacity, surging Asian LNG supply, and the weakness of crude prices does not bode well for Atlantic Basin flows to Asia.

    The broader compression of Asian spot prices at the high end against Henry Hub at the low end strongly implies shorter haul LNG trade and lower prices, PIRA said in its report.

    In the United States, despite sequentially faltering domestic production and robust electric generation gas burns, high absolute storage levels facing near-term gas balances continue to pose bearish price risks. As in 2012, the upcoming Bidweek cycle encompassing settlement of the September NYMEX contract looks especially prone to take the brunt of potentially bearish Henry Hub price fireworks.

    The next two weeks mark the lowest demand point of the year for European gas. Friday’s close below 40p/th for Sept. 2015 was the first in over a year and the bias remains to the downside in the weeks to come. PIRA does not believe in large amounts of downside risk on the prompt spot contracts, but it does see larger risks for the winter and summer strips ahead, which are more loosely tied to a falling ceiling on contract gas tied to lower oil prices.

    The North American natural gas supply curve continues to look flatter. PIRA still believes that there will be an uptick in price as the US passes through its demand surge and LNG and industrial projects start up, but the extent of the inflation adjusted run-up post-2020 has been reduced as the resource base expands and productivity improves.

    PIRA also sees an increasing concern that U.S. LNG projects will find it difficult to recover full costs plus a return in an increasingly competitive market.
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    EIA lowers crude oil price forecast through 2016

    EIA lowers crude oil price forecast through 2016

    Amid high uncertainty in the global oil market, EIA has lowered crude oil price forecasts in the Short-Term Energy Outlook (STEO), expecting West Texas Intermediate (WTI) crude oil prices to average $49 per barrel (b) in 2015 and $54/b in 2016, $6/b and $8/b lower than forecast in last month's STEO, respectively. Concerns over the pace of economic growth in emerging markets, continuing (albeit slowing) supply growth, increases in global liquids inventories, and the possibility of increasing volumes of Iranian crude oil entering the market contributed to the changed forecast.

    Since the beginning of 2015, North Sea Brent has traded about $5/b more than WTI, and EIA expects this $5/b price spread to persist at least through 2016. As gasoline prices tend to follow Brent crude oil prices, retail gasoline prices are expected to remain relatively low. EIA's updated projection remains subject to significant uncertainties: the pace and volume at which Iranian oil reenters the market, the strength of oil consumption growth, and the responsiveness of non-OPEC production to low oil prices.

    WTI futures contracts for November 2015 delivery, traded during the five-day period ending August 6, averaged $47/b. As detailed in the August Market Prices and Uncertainty Report, current values of futures and options contracts continue to suggest high uncertainty in the crude oil price outlook. These values established the lower and upper limits of the 95% confidence interval for the market's expectations of monthly average WTI prices in November 2015 at $34/b and $64/b, respectively. The 95% confidence interval for market expectations widens over time, with lower and upper limits of $27/b and $103/b for prices in December 2016. Implied volatility now averages 37%, more than double the implied volatility average this time last year (16%).
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    Eagle Ford Economics

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    There's some serious anger issues out there.

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    No wonder the $ acts like a rock.

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    Oh boy, now the shales boyz have a new trick: low declines!

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    57% IRR at $40 Crude.

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    US Oil Exports: Mexico swaps move the door an inch.

    HOUSTON, Aug. 19 (UPI) -- Approval for oil swaps with Mexico opens the spigot for U.S. crude oil, but might not be the export indication supporters hope for, an industry analyst said.

    The U.S. Commerce Department last week granted a request from Mexican energy company Petroleos Mexicanos, known also as Pemex, to swap as much as 100,000 barrels of U.S. crude oil per day for Mexican refining. The deal forbids the re-export to other nations.

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    $15 Oil?

    One big-name investor is predicting an even sharper drop.

    "There is no evidence whatsoever to suggest we have bottomed. You could have $15 or $20 oil -- easily," influential money manager David Kotok told CNNMoney.

    A further decline to $15 a barrel would be huge. Oil hasn't traded that low since early 1999, when gasoline at the pump was selling for under $1 a gallon.

    Kotok's views on the economy and financial markets are closely watched. The 72-year-old co-founder of Cumberland Advisors manages more than $2 billion in assets and hosts an annual invite-only fishing trip that doubles as an economic summit. Known as "Camp Kotok," the event lures leaders in finance to Maine each summer.

    "I'm an old goat. I remember when oil was $3 a barrel," said Kotok, whose clients include former New Jersey Governor Thomas Kean.

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    Asia spot LNG: Platts Sep JKM sees largest on-month gain at $8.007/MMBtu

    Asia spot LNG: Platts Sep JKM sees largest on-month gain at $8.007/MMBtu

    The Platts JKM for September delivery averaged $8.007/MMBtu over the July 16-August 14 assessment period, up 8.3% from August, the highest month-on-month gain so far this year, on renewed buying interest and waning spot availability in Asia.

    At $8.007/MMBtu, the JKM posted its highest monthly average price since February, when it averaged $9.911/MMBtu. However, this is the seventh consecutive month that prices have been rangebound at $7-8/MMBtu since falling from the $9-10/MMBtu level seen over January-February.

    Year on year, the JKM for September delivery was down 25.2%, the slowest decline so far this year, compared with the average price in September at $10.702/MMBtu.

    September trading had opened at $7.825/MMBtu, before rallying to $8.20/MMBtu toward the middle of the assessment period as cargoes dried up following a spate of deals.

    The bulk of these transactions were concluded between portfolio sellers and traders, most of then holding short positions into countries with ongoing buy tenders such as Pakistan, Egypt and Jordan.

    Importers in India had also issued multiple tenders and expressions of interest for prompt cargoes, with deals for volumes originating from Australia and Papua New Guinea LNG concluded close to $8/MMBtu for late-August and September delivery.

    This, coupled with emerging demand in the Atlantic Basin from South America and the Middle East, pushed up offers in northeast Asia to $8.30-8.50/MMBtu by the middle of the assessment month.

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    BP Whiting Woes Give Competitors Window to Gain as Margins Soar

    BP Whiting Woes Give Competitors Window to Gain as Margins Soar

    At least one Midwestern refinery is said to be considering a delay in maintenance work after trouble at BP Plc’s Whiting plant near Chicago sent regional profit margins to a seven-year high.

    Phillips 66 is weighing the postponement of a planned September turnaround at its Wood River, Illinois, refinery by several weeks, people familiar with the deliberations said. The Energy Information Administration estimated Tuesday that as much as 140,000 barrels a day of gasoline output is being lost after leaks at the biggest crude unit in the Whiting refinery reduced operations there.

    “Given how strong margins are, it wouldn’t be surprising to see some of the refinery maintenance by other refineries being pushed back by at least a week,” Amrita Sen, chief oil analyst at Energy Aspects, a London-based energy consultancy, said in a phone interview.

    Tempting refiners to rethink the tradition of doing repairs after the peak gasoline season wanes in September are profit margins that reached $50.48 in the Chicago area on Aug. 12, the highest since September 2008. On the same day, the spread between gasoline and oil traded in New York was $30.73. A decline to a $38.19 margin in Chicago on Tuesday still leaves the regional spread at its highest in more than two years.

    At least six other Midwest refineries have scheduled maintenance to begin over the next two months, including Marathon Petroleum Corp.’s unit in Catlettsburg, Kentucky. Whiting itself, already missing 235,000 barrels a day of capacity, is scheduled to shut a second crude unit in September, people familiar with the plans said.

    Sen estimates that crude capacity in the Midwest has been scheduled to drop 530,000 barrels a day in September and 660,000 barrels in October.

    Any delays in fall maintenance could benefit consumers. Regular gasoline in Chicagohas jumped 25 percent in a week to $3.455 a gallon, according to according to AAA, the nation’s largest motoring group.

    “The pressure is high because the refining margin is good and refiners have to serve the consumers who are struggling with this spike in gasoline prices,” Phil Flynn, senior energy analyst at Price Futures Group in Chicago. “They will face political pressure as people ask ‘‘why are you going into maintenance when we have a major refinery shutdown?’’

    BP’s 405,000 barrel-a-day Whiting refinery, 20 miles southeast of Chicago, is running at minimal rates and its big crude unit could be shut at least a month for repairs, people familiar with operations say.
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    Woodside profit drops 40% beefs up sales marketing for Browse LNG in tough market

    Woodside profit drops 40% beefs up sales marketing for Browse LNG in tough market

    Woodside Petroleum Ltd said it has stepped up marketing for its Browse floating liquefied natural gas project, but conceded it is facing a buyers' market against a backdrop of weak oil prices.

    Australia's biggest independent oil and gas company reported a 40 percent slide in first-half profit on Wednesday, hit by the collapse in oil prices since June last year, but performed slightly better than expected with the help of cost cuts.

    Chief Executive Peter Coleman said spot LNG prices over the next 18 months were likely to remain at the soft levels seen so far this year and while oil markets were rebalancing this would take time to play out.

    "Our view is the oil market is going to remain structurally oversupplied for some time," he told a conference call.

    Underlying net profit was $679 million in the six months to June, down from $1.136 billion a year earlier. Four analysts on average had expected underlying net profit of $662 million.

    Woodside cut its interim dividend to 66 cents a share from $1.11 a year earlier, sticking to a policy of paying out 80 percent of its underlying net profit.

    Its shares jumped as much as 2.7 percent on the results.

    Despite some analysts expecting a delay, the company is still targeting a final investment decision on Browse in the second half of 2016, having moved into the front end engineering and design (FEED) phase this year.

    Woodside has been able to cut cost estimates by 20 to 30 percent for the subsea and pipeline aspects of the long-delayed project off Western Australia, which analysts previously estimated at $45 billion when it was planned with a land-based plant.

    Royal Dutch Shell, whose floating LNG technology is the template for Browse, recently said it was far from certain the partners would approve the project.

    "We've moved into FEED with a belief that we'll get the project across the line. But we're also under no delusion that there's some more work to do," Coleman said.

    The partners are now focused on driving down processing costs so Browse can be profitable even if oil fails to rebound, and will be marketing the gas aggressively this year.

    "It's a buyer's market," Coleman said.

    Woodside is relying on its recent $3.6 billion acquisition of stakes in Apache Corp's Australian assets, including Wheatstone LNG, to grow. Coleman said further near-term acquisition opportunities may be limited.

    "People aren't going to let go of high quality assets until they feel like there's not many other choices left to them."

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    Obama Proposes Cuts in Methane Leaks From Oil, Gas Operators

    Obama Proposes Cuts in Methane Leaks From Oil, Gas Operators

    The Obama administration proposed rules to cut methane emissions from oil and gas production, the second major climate initiative by President Barack Obama this month.

    The proposed rules from the Environmental Protection Agency target for the first time oil wells, compressors and other equipment as part of a broad effort to reduce leaks of methane, a more intense greenhouse gas than carbon dioxide, by 40 percent to 45 percent by 2025 from 2012 levels.

    The industry says it has cut the pollution, and rules could choke a U.S. energy renaissance already dented by oil prices near a six-year low.

    “The oil and gas industry is leading the charge in reducing methane,” Jack Gerard, the president of the American Petroleum Institute, said in a statement. “The last thing we need is more duplicative and costly regulation that could increase the cost of energy for Americans.”

    The centerpiece of Obama’s climate initiative, finalized this month, orders cuts in the carbon emissions from coal and natural-gas fired power plants. Climate activists pushed Obama to tackle methane seeping from wells, pumps and storage tanks in the oil and gas network, calling it the largest source of greenhouse gases that had been so far unaddressed.

    Oil Alternative

    Obama, who pledged to cut U.S. greenhouse gases 26 percent to 28 percent by 2025, has embraced the boom in domestic oil and gas production made possible by fracking and horizontal drilling in shale rock. And the EPA is relying on increased use of natural gas -- a cleaner alternative to coal -- as a key part of its rule to cut carbon emissions from power plants. That rule, the Clean Power Plan, was released Aug. 3.

    “Cleaner-burning energy sources like natural gas are key compliance options for our Clean Power Plan and we are committed to ensuring safe and responsible production that supports a robust clean energy economy,” Gina McCarthy, the head of the EPA, said Tuesday in a statement.

    The proposed rule will require oil and gas producers to upgrade their pumps and compressors on new wells, and expand the use of methane-capturing equipment now required for gas wells to oil wells. A separate rule, also proposed Tuesday, would force limits on ozone-forming pollutants from oil and gas wells in areas prone to smog.

    By 2025, the rules would achieve the greenhouse-gas cuts equivalent to removing 2 million cars from roads a year. Still, environmental groups had pushed for the EPA to address methane leaks from existing wells and equipment, and for the most part EPA punted on those proposals for now.
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    Struggles to cut cost delay oil play production in Argentina

    Struggles to cut cost delay oil play production in Argentina

    Argentina has drawn wide interest for its vast shale oil and natural gas production potential, but when it comes to committing investment to extract the resources, the hesitation is just as significant.

    The potential is huge. The US Energy Information Administration estimates that the biggest play, Vaca Muerta, holds 16.2 billion barrels of oil resources and 308 Tcf of gas resources. That's enough for the country to emulate the US shale boom.

    ExxonMobil, Shell, Total, Wintershall and others have taken stakes in Vaca Muerta, but only Chevron has advanced into production in a partnership with state-run YPF. They are producing about 43,000 b/d of oil equivalent, the first shale oil extracted outside North America.

    The others are moving toward pilots, a slow progression that is a sign of how hard it is to do business in Argentina and achieve what is most important for developing the play: getting drilling and completion costs down to profitable levels.

    YPF is making a go of it. With Chevron, it has drilled 360 oil wells in Vaca Muerta and brought down drilling costs to $7 million per well for verticals this year from $11 million in 2011.

    But that's still shy of the $4-5 million target, or the cost of horizontal wells in the prolific Bakken and Eagle Ford Shales.
    Without reaching these levels, 'the wells won't be profitable,' said Alex Fleming, a senior manager in oil and gas at EY Advisory, a US-based business advisory.

    A reason not to rush into production — only 400 wells have been drilled — is that wells must be tested for up to two years to gauge the potential of the shale rock before a company will commit billions of dollars. This is especially the case now that low global oil prices have slimmed investment budgets for frontier plays.

    YPF is only starting to make more strategic decisions, including moving rigs to the east of the Loma Campana block where it has found sweet spots for horizontal drilling. While more expensive at $14 million per wells with 18 frac stages, horizontals can yield twice the productivity as verticals, YPF chief financial officer Daniel Gonzalez said last week.

    YPF has cut the cost for horizontals from $15 million in the first quarter, when it was at 15 frac stages. The next step is to extend the laterals to as much as 2,000 meters (6,562 feet) from 1,500 meters, allowing for additional frac stages, Gonzalez said.

    In Argentina, however, YPF has been struggling to get below that $7 million per well mark.

    More could be done to cut costs, such as drilling slim-hole wells, sourcing proppants locally and convincing unions to work in smaller crews. But this likely won't be enough because a far greater inhibitor to cost reduction is the country's economic and political instability.
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    How Good Is the Permian Basin Anyway?

    How Good Is the Permian Basin Anyway?

    E&P companies have added 30 horizontal rigs in the Permian basin since the end of June. Most analysts didn't notice (Figure1).

    Figure 1. Tight oil horizontal rig counts since January 1, 2015. Source: Baker Hughes & Labyrinth Consulting Services, Inc.

    Rig counts in most active plays are stabilizing after falling more than 50% since November but companies are adding rigs in the Permian like there's a boom going on. Last week the total U.S. rig count was unchanged but 7 new horizontal rigs were added in the Permian. In fact, rigs were added in each of the last 7 weeks there.

    There have been a lot of silly pronouncements since oil prices collapsed about how rig counts don't matter anymore. Pad drilling and extraterrestrial advances in rig efficiency have made rig counts a meaningless measure. Also, the backlog of deferred completions allow companies to add production without adding new rigs. So we are told.

    But rig counts matter because they show where capital is going. When a rig contract is signed, major cash follows and usually, for a long period of time.

    When capital in the oil business is scarce, a counter-flow of 30 new rigs into one play says a great deal about how company executives view that play. 30 new rigs in the Permian basin means more than $200 million in capital expenditures if all the rigs are released after drilling just one well and no further spending occurs as a result of the drilling.

    Since rig counts began falling in November 2014, there have always been more rigs in the Permian than in any other tight oil or shale gas play (Figure 2).

    Figure 2. Tight oil and shale gas rig counts as of August 14,2015. Source: Baker Hughes & Labyrinth Consulting Services, Inc.

    More rigs have also been released in that play than in any other. Still, there are more than twice as many rigs drilling in the Permian as there are in the Eagle Ford Shale, and almost three times as many as there are in the Bakken play.

    Rig count is how company executives vote on the plays.

    We may hear great things about the potential of the Utica Shale but it's in the lower third for rigs and, therefore, capital. Studies proclaim that the Barnett and Fayetteville core areas are commercial at current gas prices but almost no one wants to put rigs there and spend money. Even the mighty Marcellus is a distant fourth in rig count behind the Permian, Eagle Ford and Bakken.

    There is a reason and it is profit or the perception of profit and rig count is how we know the score.

    For plays like the Eagle Ford and the Bakken, the best leases were taken long ago. If you don't have a position, the only way to get one is to buy or join someone else at a premium (e.g., Devon and Encana in the Eagle Ford).

    But the Permian is different. It is an old producing basin whose glory days were decades ago until tight oil technology came along. As a result, the land situation is complex and fragmented and there is usually a way to get in on a lease or a play with a good landman and enough money.

    There are multiple pay horizons in the Permian whereas, in the Eagle Ford and Bakken there is basically only one pay zone. In a comprehensive study done in 2000, Shirley Dutton of the Bureau of Economic Geology identified 32 different oil plays from 1,339 significant reservoirs in the Permian basin and each reservoir with cumulative production greater than 1 million barrels of oil.

    The Bakken and Eagle Ford are dominated by a dozen or so substantial public companies but in the Permian, there are hundreds of operators, many of whom are small and privately held, and some that are without access to the major capital required to be a shale player. To put it bluntly, the Permian is a great place for tight oil have-nots to find a home. Deals can be made in the Permian.

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    Marcellus players still making money at $1 gas

    Marcellus players still making money at $1 gas

    Range Resources, Cabot Oil & Gas, EQT, and Southwestern Energy are some of the names that should be in a world of hurt with natural gas prices in the northeast around $1. But they’re not. Here’s why: cash costs and hedges.

    Vincent Piazza of Bloomberg Intelligence says Range Resources in the second quarter had realized pricing of $2.95 per Mcf –not too shabby with Henry Hub at $2.83 for the same period. Piazza says the reason why Range Resources got so much for its gas was because of hedges – natural gas the company has sold previously for a locked in price. Strip that out and the realized price was $1.95 – which could have slowly eaten away at profits. Luckily for Range Resources, the company is 85% hedged for this year.

    So what happens next year once these hedges roll off? Well, Range has locked in hedges for about 50% of its production for 2016. Piazza says there will be some impact to these companies if differentials between northeast natural gas prices and Henry Hub stay wide.

    Low cash costs – these companies can produce natural gas on the cheap – near dirt cheap. Cash cost are around average $1 Mcf (?) because  - as Piazza puts it - these companies have “cracked the code.” They are doing more with less.

    Look at Southwestern. It's likely cutting capex in 2016 to $1 billion but plans to grow output by 4% year on year thanks to greater capex discipline and operational efficiency.

    Hedges, low costs, better efficiency. They’re why Piazza says these companies are in a better position than other names outside the Marcellus/Utica play.
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    Britain offers new shale gas sites for first time in seven years

    Britain offers new shale gas sites for first time in seven years

    Britain offered shale gas exploration licences for the first time in seven years on Tuesday, awarding new sites to companies including IGas and France's GDF Suez.

    Britain's Conservative Prime Minister David Cameron has promised to go "all out for shale", hoping it will help reduce dependence on energy imports and generate additional tax revenue despite opposition from environmental campaigners.

    The government's licensing round, delayed since the start of the year, offered 27 new shale gas and conventional exploration blocks and attracted 95 applications from 47 companies, the government said, showing developers are still interested in exploring for the unconventional fuel in Britain.

    Other European countries, including France and Germany, have banned the use of shale gas hydraulic fracturing, or fracking, due to environmental concerns.

    The British government also offered new blocks on Tuesday to explorers Egdon Resources and Cuadrilla Resources, as well as Swiss chemicals company INEOS.

    "We are keen to move quickly to evaluate the potential of this resource, and determine if we can economically produce gas from our licenses," said Gary Haywood, chief executive of INEOS Shale, in a statement.

    The licences will be formally awarded once further assessments are carried out on a second tranche of 132 blocks that could be awarded at a later date.

    Despite these concerns, the government fully supports shale gas development and Tuesday's licence awards show it intends to continue pushing it forward.

    Last week, it changed planning guidelines to fast-track applications for fracking after local politicians in northwest England rejected two planning permits in June.
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    Warren Resources Announces Initial Results From Upper Marcellus Completions

    Warren Resources Announces Initial Results From Upper Marcellus Completions

    Warren Resources, Inc. today announced initial results from its well completion operations in the Upper Marcellus formation, located within its acreage block in Wyoming County, Pennsylvania.

    Warren successfully drilled and set pipe for two Upper Marcellus wells in the first quarter of 2015, and completion operations commenced in July 2015. The two Upper Marcellus wells have been flowing back for approximately two weeks and the current combined daily production rate is 17 MMcf per day with 3% of flowback load recovered. The wells are drilled from Warren's Mirabelli and Ruark pads.

    A successful test of the Upper Marcellus could potentially add over 40 additional well locations on Warren's acreage block. No reserves were booked at year end 2014 for the Upper Marcellus locations.

    Warren's drilling and completion efforts highlighted some attractive features of the Upper Marcellus formation in its acreage block. It is 180 feet thick, compared to the Lower Marcellus in the same area measuring 120 feet in thickness. Offset Lower Marcellus wells were monitored during fracturing operations and indicated no communication with the Upper Marcellus. The Company believes production rates and reserves associated with these wells will be 100% accretive.

    In addition, Warren has the advantage of having pipeline infrastructure and pads already in place to support the drilling of additional wells in the Upper Marcellus, thereby eliminating time consuming infrastructure projects, and providing economic returns at lower realized gas prices.

    Warren adhered to its strategy of driving operational efficiencies, with drilling costs for the two Upper Marcellus wells coming in 5% under budget and completion operations coming in 10% under budget. The Company sees an opportunity to reduce drilling and completion costs by 15% for future locations while maintaining exceptionally low lease operating expenses in the range of $0.75 per Mcf, including gathering and transportation costs.
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    Shell in framework LNG deal with private Chinese firm

    Shell in framework LNG deal with private Chinese firm

    Royal Dutch Shell has entered a framework deal with a Chinese energy firm to jointly purchase and distribute liquefied natural gas, Shell said on Tuesday, a rare cooperation between a global energy company and a local private player.

    Shell signed the non-binding framework agreement with Guanghui Energy Co Ltd, which is building a gas receiving terminal in Qidong of Jiangsu province with a designed annual handling capacity of around 600,000 tonnes in its first phase.

    Chinese companies other than the country’s dominant energy giants are emerging as LNG importers after Beijing started allowing third-party access to import terminals built by the majors and private investment in the sector.

    Instead of a previous intent to be involved in building and operating the terminal, Shell, one of China’s top LNG suppliers, is now looking at only purchasing and marketing LNG, gas that is super-chilled in liquid form and transported in specialized tankers.

    “Our cooperation with Guanghui has evolved and the current scope under discussion is a joint venture to purchase, import and on sell LNG through the Qidong terminal,” Shell said in an emailed statement.

    Guanghui Energy, one of the country’s pioneer independent players in the LNG industry, has plans to expand its Qidong terminal with phase two and three developments, company and industry sources have said.

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    LNG ship owners launch vessel pool to cut costs in depressed market

    LNG ship owners launch vessel pool to cut costs in depressed market

    Three of the top liquefied natural gas (LNG) tanker owners have decided to market 14 vessels jointly on a spot charter basis, part of a new pooling arrangement that is aimed at cutting operating costs in a depressed market.

    The pool, consisting of eight modern vessels from Norwegian shipper Golar LNG and three each from Gaslog and Dynagas, will commence chartering operations in September, a statement from Gaslog said on Tuesday.

    A glut of newly built LNG vessels emerging from shipyards in Asia has been one factor driving down daily charter rates to around $30,000/day, compared with $130,000 two years ago.

    "The LNG Carrier Pool allows the participating owners to optimise the operation of the pool vessels through improved scheduling ability, cost efficiencies and common marketing," it said.

    The vessels will seek employment exclusively for charters of 12-months duration or less.

    The move reflects a growing LNG market shift towards short-term trading of cargoes as prices come under pressure and new production from Australia and the United States towards the end of the year is expected to add to oversupply.

    "The real driver primarily is the fact that we are seeing the short-term shipping market growing substantially, in the year to date there have been 97 short-term vessel fixtures versus around 78 in 2014," Gaslog Chief Executive Paul Wogan told Reuters.

    "It's becoming a much more important piece of the (LNG) shipping market," he said.

    The pool is expected to cater to this need by making vessel scheduling more flexible for traders, including the provision of rare single-voyage charters known as Contracts of Affreightment and other contract forms new to LNG shipping, the firm said.

    In May, Golar LNG broke the mould by allocating six LNG tankers to Swiss trader Trafigura on a single-voyage, or COA, basis, as part of a bid to keep its fleet busy and keep the ships refrigerated at low temperatures to make them more marketable.

    LNG is ordinary natural gas chilled into liquid form at minus 162 degrees Celsius. Tankers carrying the fuel must be "cold" in order to store and transport the fuel. If vessels become "warm" through lack of use, they have to go through a cooling process before accepting cargoes.

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    Has Saudi policy failed?

    With the latest analysis from theInternational Energy Agency showing that oil production capacity continues to rise despite the sharp fall in prices, is Saudi Arabia ready to admit that its strategy of over-production designed to force other producers out of the market has failed?

    This year is proving to be a bad one for Saudi.

    • At the heart of the problem is Saudi’s arch rival Iran. President Barack Obama pointedly overrode Saudi concerns over the nuclear negotiations with Iran and reached a deal that is already transforming the regional balance of power. Western politicians and investors – led, of course, by the oil majors – are flooding into Tehran even before the deal is completed. Iranian oil production and exports may not rise that much immediately but over a year or two a million barrels a day could be added, undermining an already weak market.
    • The concern about Iran’s rehabilitation and growing regional influence has led the Saudis to intervene in Yemen against the Iranian backed Houthi forces. The ill-conceived and badly executed air campaign has achieved little beyond demonstrating the limitations of the Saudi military. After four months, the result is a humanitarian disaster that leaves Houthi forces in control of much of the north of Yemen on the edge of Saudi Arabia’s southern border.
    • Meanwhile, the Saudi’s attempted assertion of power in the international oil market has backfired. The US shale industry has not followed the script by obediently cutting back in production as prices have fallen, as an excellent article from the Oil and Gas Journal confirms. On the contrary, producers have used the pressure of low prices to cut costs and US shale production this year will be higher than in 2014. Around the world other oil producers, including the Russians, have responded to the price fall by increasing output to raise revenue. The oil price is back to $50 a barrel. With stocks already high and demand flat because of the Chinese downturn, prices could fall further.

    The fact that the resilience of the shale industry is so strong seems to have come as a surprise, which just shows how out of touch the Saudi rulers have become. The king is 79, the oil minister Ali al-Naimi is 80. Both perhaps thought that the world oil market still operates as it did in the 1980s. It doesn’t, and a pragmatic regime in Riyadh would accept that Saudis interests lie in a stable oil price perhaps at $70 to $80 a barrel for the next five years. To get to that will require a serious cut in production of perhaps 2mbd. A few others such as Kuwait and Abu Dhabi could make smaller contributions. Opec discipline is never perfect, and will certainly be challenged as Iran and Iraq raise production over the next few years but even partial discipline is better than the alternative.

    These are not easy choices. On balance, I think a change of policy is more likely than not. Over the years caution rather than assertion has served the kingdom pretty well. A change of policy would probably mean a change of leadership and almost certainly the departure of the deputy crown prince.
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    Canada crude woes..Trican hints at bankruptcy.

    Enbridge mid-month apportionment adds to Canada crude woes

    Canadian pipeline operator Enbridge Inc is rationing space for mid-month on its line 4/67 ex Kerrobert for August, according to a notice to shippers on Monday that was seen by Reuters.

    Line 4/67, which is a part of its mainline system, would be apportioned by an additional 5 percent for August, the notice said. The company said on July that line 4/67 nominations were at 29 percent apportionment for August.

    The mid-month apportionment piles fresh misery on Canadian crude producers, who are already struggling with outright heavy crude prices at their lowest level in at least a decade.

    Extra rationing of pipeline space means producers cannot ship all their nominated volumes and will likely lead to a buildup of crude in Alberta, putting further pressure on Canadian differentials.

    "This additional apportionment is a result of numerous unplanned outages, power curtailments, and lower-than-expected rates on the western heavy system in late July and early August," the company said in a note to shippers on Monday.

    Enbridge restarted two key Canadian crude lines last week after they were shut following a crude oil release in Missouri on Aug 11.

    The discount on Western Canada Select (WCS) heavy blend crude for September delivery last week hit its widest level this year following the pipeline disruptions last week and an ongoing disruption at BP Plc's Whiting, Indiana, refinery, which is one of the biggest consumers of Canadian crude.

    September WCS was last trading at $19.35 per barrel below the West Texas Intermediate benchmark, putting the outright price of heavy Canadian crude at $22.52 a barrel.

    The collapse of oil prices walloped Trican Well Service Ltd. in the first quarter as customers slashed capital spending, prompting the fracking company to cut 2,000 jobs and cancel dividends.

    Trican, which has operations in Canada, the United States and elsewhere, warned it’s at risk of breaching conditions of its sizable debt, which could threaten its ability to keep operating. It is seeking relief from its lenders. The shares tumbled 14.5 per cent Wednesday.

    Like the rest of the drilling and well-completion business, demand for Trican’s services plummeted in the quarter – normally the busiest of the year – as producers whittled down drilling plans. Trican suffered a $19-million operating loss even after opting to park more than a third of its equipment.

    “It’s a very, very difficult time for the frackers, and Trican’s leverage is exacerbating the situation for them,” AltaCorp Capital Inc. analyst Dana Benner said. “Other service companies have cut their dividend … so Trican is not unique in this respect. But if you look at its ratios, the leverage is very high for the company. I think the market is looking at the leverage, the fact that they were not able to obtain covenant relief from their lenders yet.”

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    Petrobras board approves sale of 25 pct of fuel unit, two oppose

    Petrobras board approves sale of 25 pct of fuel unit, two oppose

    The board of directors of Brazil's state-controlled oil company Petroleo Brasileiro SA approved the sale of at least 25 percent of its fuel unit BR Distribuidora, according to board minutes published in a securities filing late Monday.

    Reuters previously reported that Petrobras would seek to sell at least a quarter of the unit, which controls Brazil's largest service-station network. A sale is expected as early as the end of this year.

    Petrobras, as the company is known, wants to sell $15.1 billion of assets by the end of 2016 to help reduce its $132 billion of debt, the largest of any oil company.

    A majority of the board on Aug. 8 approved the plan to seek approval from Brazil's securities regulator CVM for the sale, which could expand beyond 25 percent with additional "Green Shoe" and "Hot Shoe" sales, the statement said.

    There were two votes on the ten-member board against the plan, including that of board chairman Murilo Ferreira.

    Ferreira opposed the sale on the grounds that additional decisions needed to be made, including hiring professionals with experience in retail sales and the approval of a business plan for BR Distribuidora, before any sale can be approved, the statement said.

    Board member Deyvid Bacelar opposed the motion on the grounds that market conditions were not right for a sale and that BR Distribuidora could provide improved returns to Petrobras if the board improved its management or sought out partnerships instead of selling stock to the public.

    Bacelar represents union workers at Petrobras.

    BR Distribuidora was recently valued at around $10 billion by UBS Securities analysts.

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    Goldboro LNG granted import and export approval

    Goldboro LNG granted import and export approval

    Pieridae Energy said that it has been issued long-term licenses by the National Energy Board of Canada to import natural gas from the USA and to export LNG from Canada.

    The licenses issued with terms and conditions were granted in response to an application by Pieridae submitted on October 24, 2014 to the NEB.

    The natural gas imported from the USA and natural gas supplied from Canadian sources will be processed at the proposed Goldboro LNG facility to be located in Goldboro, Nova Scotia and exported from Canada’s LNG for delivery to Europe and other countries, the company said in a statement.

    The term of the export license is for 20 years starting from the date of first export with a maximum annual export capacity of 16.675 billion cubic meters. The import license is also for a 20-year term starting from the date of first import and has a maximum annual import volume of 11.845 billion cubic meters.

    In May 2015, Pieridae Energy (USA), a corporation affiliated with Pieridae, received authorization from the Department of Energy of the USA to export natural gas to Canada for end use in Canada and for further export to countries with which the USA has free trade agreements for trade in natural gas.

    Pieridae has a 20-year sales agreement with European-based E.ON Global Commodities to deliver approximately five million metric tons per annum of LNG produced from the proposed Goldboro LNG facility.

    Pieridae plans to make a final investment decision on the Goldboro LNG project in 2016.
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    Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains

    Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains

    Is Saudi Arabia on the verge of winning the war on US Shale firms? It appears the spigot of malinvestment-subsidizing liquidity that kept numerous zombie energy firms alive has been shut off almost entirely. As oil prices return to cycle lows, so credit risk has spiked to record highs and issuance of life-giving bonds has collapsed. This has opened up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks' slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow.

    As public market demand for this sector has collapsed...

    Through out much of the crude market rout that started in mid-2014 oil firms could rely on generous capital markets investors betting on a quick recovery in prices, which made any asset sales look unattractive. But since crude prices began tanking again in early July after a partial three-month recovery, oil firms have finally started to feel the squeeze.

    A torrent of $44 billion in high-yield debt and share sales in the first half of this year has slowed to a trickle with oil now at just above $42 a barrel, 30 percent below its June levels and 60 percent down from June 2014, CLc1 and a more pessimistic view taking hold that global oversupply could keep oil cheap for years.

    The number of high-yield bond and share issues has tumbled more than two-thirds from levels seen in May,Thomson Reuters data show.

    That opens up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks' slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow.

    “The capital markets showed up in force in the first quarter much to everyone's surprise," said Carl Tricoli, managing partner at Denham Capital, a private equity fund in Houston.

    "It didn't solve people's problems, so now when you roll to 2016 ...there will be an opportunity for private equity-backed companies with plenty of capital in place to go out and start buying."

    On Monday, shale producer Magnum Hunter Resources Corp. (MHR.N) said it would get an unnamed private equity fund to pay for up to $430 million of drilling work in Ohio in return for rights to the land.

    Dealmakers say potential sellers of oilfield assets are now discussing bids they would have rejected a few months ago while the changed outlook for oil allows buyers to adjust bids down.

    But hope is fading as Bill Conway, co-CEO of The Carlyle Group, a giant in alternative funding, struck a cautious tone...

     "I would say, this is a good time to be careful when it comes to investing in energy."

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    Germany Proves Russia’s Most Loyal Gas Customer as Price Plunges

    Germany Proves Russia’s Most Loyal Gas Customer as Price Plunges

    Russia boosted natural gas supplies to Germany by almost 50 percent in the second quarter as prices plunged, while the world’s largest natural gas exporter struggled with weaker demand from its former Soviet allies.

    Gazprom PJSC’s deliveries to Germany jumped to 11.7 billion cubic meters compared with 7.8 billion a year earlier, the highest quarterly level since at least 2010, according to data on the Moscow-based exporter’s website. Gazprom’s average gas price at the German border fell 36 percent this year as crude plunged.

    The European Union, which gets about 30 percent of its gas from Russia, may be Gazprom’s only growing market this year, the government in Moscow said last month. Gazprom has boosted fuel sales to the 28-nation bloc since the end of May as Brent crude slumped 21 percent. Most of the company’s gas contracts are linked to the price of oil.

    “Germany has been a loyal customer for Russia for years,” said Alexander Kornilov, an oil and gas analyst at Alfa Bank in Moscow. “Such relationships stay in place, though volumes depend on a price -- business is business.”

    Gazprom’s price to Germany fell to $6.68 per million British thermal units in July, the lowest level since December 2009, according to the International Monetary Fund. Germany is importing almost all of its gas from Russia now, energy broker Marex Spectron Group Ltd. said in a July 29 note.

    Germany was the only nation among Gazprom’s key clients that increased Russian gas purchases in the first half. The company’s total shipments of the fuel fell 10 percent to 222.8 billion cubic meters through June, mainly because of lower sales in Italy, Turkey, Central Europe, Ukraine and Russia, Gazprom said in its earnings report under Russian accounting standards on Friday.

    Gazprom cut its 2015 output forecast for at least the third time this year, reducing its outlook to 444.6 billion cubic meters, according to the report. That’s only 0.1 percent higher than last year’s record-low output. Russia’s Economy Ministry predicted last month the gas company would cut output to 414 billion cubic meters for 2015.

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    Schlumberger in business unit sale

    Schlumberger in business unit sale

    Oilfield services behemoth Schlumberger is selling its management consultancy wing to global giant Accenture.

    Schlumberger Business Consultancy (SBC) is going to the buyer for an undisclosed sum, Accenture said on Monday.

    It is understood that most or all of current SBC employees will move over to Accenture, which is looking to boost its offering to oil & gas clients.

    Accenture Strategy chief executive Mark Knickrehm said: “Our technology-driven business strategies and digital knowledge complement the core consulting strengths of the professionals who will join us through this acquisition.”

    Accenture Resources chief executive Jean-Marc Ollagnier added: “The upstream oil and gas sector is undergoing a fundamental transformation, partly driven by oil price volatility, but also by increased regulation and technology advances.

    “Energy companies are also under pressure to improve internal performance in delivering large capital projects, reduce production costs and extend into new areas, including renewables.

    “This acquisition will enhance our capabilities in helping clients navigate these challenges with a combination of business, digital and technology knowhow that differentiates us in this global market.”

    SBC was founded in 2004 and has more than 250 consultants working from nine global offices. Schlumberger’s website says the wing is “the world’s leading management consultancy in the upstream oil and gas industry, and a leading player in the energy sector more generally”.
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    Russia’s Rosneft registers to take part in Brazil licensing round

    Russia’s Rosneft registers to take part in Brazil licensing round

    Russian energy company Rosneft said on Monday it had registered to take part in the 13th licensing round organised by Brazilian national energy agency Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis.

    Rosneft said that 10 oil basins and blocks, located onshore and offshore, would be put up for sale at the licensing round.
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    Santos refutes equity raising reports, updates GLNG

    Santos refutes equity raising reports, updates GLNG

    Australia’s Santos, operator of the GLNG project, has denied media reports it was planning to launch an equity raising.

    The company’s shares dropped 9 percent on Friday, amid concerns it would need to raise cash as oil and gas prices show no sign of recovery.

    “Santos retains ample liquidity, with over $2 billion in cash and undrawn debt facilities currently available,” the company said in a statement.

    The company said it continues to take positive steps to strengthen its operating position in the lower oil price environment. First half capital expenditure was more than 50% below 2014 levels

    “First half capital expenditure was more than 50% below 2014 levels and unit production costs for the first half were 11% lower,” Santos said.

    “The underlying performance of the business remains strong. Production was up 13% in the first half and continued growth is expected over the next few years, coinciding with the ramp up of GLNG,” it added.

    GLNG project

    According to Santos, the GLNG project being developed on Curtis Island off Gladstone has made significant progress and remains on track for first LNG around the end of the third quarter.

    All upstream facilities are fully operational and good progress is being made on commissioning the LNG plant on Curtis Island, the company said.

    The LNG project involves gas field development in the Surat and Bowen Basins, a 420-kilometre gas transmission pipeline, and the construction of a 7.8 mtpa LNG plant on Curtis Island.
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    Saudi money market turmoil shows bank jitters over bond issues

    Saudi money market turmoil shows bank jitters over bond issues

    Turmoil in the Saudi Arabian money markets suggests that financing the government's budget deficit in an era of cheap oil may not be smooth as banks worry about the risk of a liquidity squeeze.

    The government sold 20 billion riyals ($5.3 billion) of riyal bonds to banks last Tuesday to help to cover a huge deficit caused by low oil prices. It was only the second sovereign bond issue since 2007; the first, placed with quasi-sovereign institutions, occurred in July.

    Cash-rich Saudi banks easily absorbed last week's issue, but money market moves show concern about their ability to absorb the multi-year series of issues that may become necessary if oil prices remain low.

    Adding to the jitters is officials' secrecy about their bond plans. Authorities have privately told banks no more than 40 percent of the deficit will be financed with bonds; the rest will be covered by running down fiscal reserves.

    But authorities have not released a bond issuance calendar or detailed figures for the government's borrowing requirement.

    This has left banks in the dark about how many more bonds they might be asked to buy in coming months and years.

    Bankers, therefore, are scrambling to hedge against the risk of a liquidity crunch a year or two from now, causing the Saudi money curve to steepen even as the U.S. curve flattens in anticipation of an interest rate rise this year - an unusual divergence.

    The cost of two-year riyal deposits in the interbank market shot up to 1.53 percent last week from as low as 1.05 percent six weeks earlier. The cost of swapping fixed for floating payments with a one-year interest rate swap jumped 30 basis points from July.
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    Why U.S. rig counts are rising even as oil plunges to new lows

    Why U.S. rig counts are rising even as oil plunges to new lows

    U.S. oil production slowing, but not as fast as anticipated

    “The recent increase in rig counts is due to prices two months ago. There’s always a lag between price changes and drilling activity,” explained James Williams, economist at WTRG Economics in London, Ark. “With the recent drop in prices, we’ll probably see some pressure on rig counts to slack off again.”

    On Friday, oil-services firm Baker Hughes said the number of U.S. oil rigs rose for a fourth straight week. There were a total of 672 rigs as of Friday, up two from a week ago. The number of rigs bottomed at 628 in late June, ending months of steep declines. Still, the number of rigs is down 917 from this time last year.

    Oil began a plunge in mid-2014, driving the price of West Texas Intermediate futures on Nymex to less than $44 a barrel by March of this year from a high in June 2014 of around $107 a barrel.

    Oil then saw a spring rebound, notching a 2015 high at $61.43 on June 10 before coming under renewed pressure that saw crude CLU5, -1.27%  take out the March lows Thursday.
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    Malaysia’s Petronas says operations won’t cover 2015 dividend

    Malaysia’s Petronas says operations won’t cover 2015 dividend

    Malaysia’s Petroliam Nasional Bhd (Petronas) on Friday said cash from operations will cover neither capital expenses nor committed dividends for 2015, forcing the state-owned oil firm to draw on reserves and further cost savings.

    Petronas contributes almost half of Malaysia’s oil revenue. But weak global prices have depressed income, leaving the country with a devalued currency and at risk of a credit-rating downgrade, while debts mount at state investment fund 1MDB.

    “We will have to persevere with more austerity measures,” said Petronas President and Group Chief Executive Wan Zulkiflee Wan Ariffin at an earnings briefing.

    Petronas said net profit fell 47 percent to 11.1 billion ringgit ($2.73 billion) in April-June due to weaker crude oil prices as well as lower sales of oil and liquefied natural gas.

    Still, “all the plans are in place” to meet the 26 billion ringgit dividend promised to the government this year, Wan Zulkiflee said.

    He said cost savings reached 600 million ringgit in the first half of 2015, and that oil prices will likely remain low for the rest of the year. “There’s growth in demand, but growth in supply is a lot bigger,” he said.

    Petronas booked its first quarterly loss in five years at the end of last year, but returned to profit in January-March.
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    Russia’s Rosneft plans to increase oil output

    Russia’s Rosneft plans to increase oil output

    Russia’s Rosneft, the world’s top listed oil producer by output, plans to increase production, Chief Executive Igor Sechin told Prime Minister Dmitry Medvedev on Friday, according to the government’s website.

    Rosneft oil production was slightly down last year to 4.1 million barrels per day from 4.2 million bpd in 2013, due to lower output at mature fields.

    Sechin, who did not give a production forecast or a timing for the increase, said that Yuganskneftegaz, Rosneft’s largest oil producing unit, could be one of the sources of growth.

    Sechin said that Yugansk, a former Yukos asset, was expected to produce around 66 million tonnes of oil this year. He said new wells would be added in the field which pumped 64.5 million tonnes of oil last year.

    According to the Russian Energy Ministry, Rosneft’s oil production was down 1.2 percent in July, year-on-year.
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    China LPG prices continue to edge lower on seasonal demand lull

    China LPG prices continue to edge lower on seasonal demand lull

    Imported and domestically produced LPG prices continued to edge lower across southern and eastern China this week amid bearish market outlook and the seasonal lull in demand, local trade sources said Friday.

    Import cost for cargoes arriving in the first half of September was estimated below Yuan 3,000/mt ($468.68/mt) CFR China, based on recent Asian refrigerated LPG values, which was lower than the current spot prices in the domestic market, according to traders.

    This is believed to have dampened buying interest and exerted downward pressure on spot prices this week, trade sources noted.

    In China's southern Guangdong province, imported LPG cargoes of mixed propane and butane were said to have traded at around Yuan 3,350-Yuan 3,400/mt in the wholesale market this week, down slightly by Yuan 50/mt from Yuan 3,400-Yuan 3,450/mt in the previous week.

    "We are not optimistic about the price in the near future ... import cost for later arrivals have dropped to around Yuan 3,000/mt or even lower," a trader said.

    "Besides, LPG supply is ample amid weak seasonal demand, which has discouraged buying interest as well," he noted.

    Four refrigerated cargoes, totaling around 110,000 mt, were reported to have arrived in Guangdong province this week, up slightly from around 103,000 mt seen in the previous week, according to updated shipping data from Beijing-based energy information provider JYD Commodities Hub.

    Domestically produced LPG was said to have traded at Yuan 3,300-Yuan 3,400/mt in the region this week, also down by around Yuan 50/mt from last week.

    Trading activities remain thin as many buyers continued to maintain relatively low inventory levels amid a bearish market outlook, traders added.

    In eastern China, both imported and domestically produced LPG was said to have traded at around Yuan 3,550-Yuan 3,650/mt and Yuan 3,500-Yuan 3,600/mt, respectively, in the region this week, down by about Yuan 50/mt from a week ago as well.

    Bearish market outlook and weak demand were also cited as main reasons behind the fall in spot LPG prices in the region this week, according to traders.
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    Energy XXI slashes spending but maintains production estimates

    Energy XXI slashes spending but maintains production estimates

    Energy XXI expects to produce roughly the same amount of oil and gas for a fraction of the cost as it reaps the benefit of rapidly falling costs and more efficient operations.

    The Houston-based offshore oil company set its annual capital expenditure budget around $140 million, down from the $640 million to $670 million Energy XXI projects it spent during its 2015 fiscal year, which ended on June 30. That budget is based on $50-per-barrel oil, but Energy XXI said it would consider expanding development drilling if prices rebounded.

    Despite slashing its spending budget, Energy XXI says it will pump between 54,000 and 59,000 barrels of oil equivalent per day in the 2016 fiscal year, about the same as its prior year production rate of 58,900 barrels of oil equivalent per day. Oil and natural gas liquids comprise about two-thirds of its output estimates.

    As falling oil prices pull down lease operating costs, the Houston-based oil company said it can now extract a barrel of oil equivalent for about $52, down 30 percent from the same time a year ago.

    “In this challenging commodity price environment, I’m very proud of our team’s ability to maintain capital discipline and reduce per barrel lease operating costs,” Chairman, President and CEO John Schiller said in a statement Thursday. “More importantly, we have accomplished this while keeping production stable.”

    Amid a global crude slump that’s battered oil companies — Energy XXI’s stock has plummeted from $32.93 in October 2013 to below $2 in recent weeks — the company has been scrambling to cut costs and figure out cheaper ways to produce. It trimmed overall costs in part through a recent round of layoffs. The company declined to provide details about the extent of the job cuts, which happened in Houston and elsewhere.

    Energy XXI has also been targeting “low-risk oil opportunities,” including returning to already produced wells to extract additional oil and gas from different zones. Because infrastructure on these wells already exists, these so-called recompletions are a cheaper way to boost output, each costing about $3 to $4 million versus the $10 million it costs to drill and complete a new well.

    “It’s the most economic way to address our proved reserves,” Greg Smith, vice president of investor relations, said in an interview with Fuel Fix.

    Energy XXI said its recompletion program in a large salt dome field in the Gulf of Mexico 96 miles south of New Orleans has yielded good results, with costs coming in much lower than original estimates.

    So far, the company has brought online nine recompleted wells in the region and is working on a tenth, all told doubling its output in the field since the start of the year. Energy XXI has identified 25 projects for completion in fiscal year 2016.
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    One of the biggest mysteries in the oil market surrounds just how much oil Iran is hoarding at sea.

    That's a key question because Iran's nuclear deal with the West could lift crippling sanctions, and pave the way for tons of Iranian oil to hit the market. A surge in Iranian exports would only deepen the oil supply glut that has sent prices to fresh six-year lows this week to below $43.

    Iran claims it's not stockpiling oil in tankers in the Persian Gulf, but no one believes it. Up until recently, energy experts thought Iran's vessels held 30 million to 40 million barrels of oil.

    But maritime surveillance firm Windward has harnessed sophisticated technology to determine Iran is actually hoarding 50 million barrels of oil. That's up nearly 150% from April 2014 when Windward started tracking this closely-watched metric.

    Somebody had to go first—why not the Swiss?

    News that Switzerland has become the first Western country to start lifting sanctions on Iran will no doubt be followed swiftly by reports of other nations (and corporations) seeking some of the Islamic Republic’s soon-to-be-unfrozen billions. Russia and China have already begun talking up arms sales to Tehran; over the weekend, Moscow sent a pair of warships to the port of Anzali, to display Russian naval wares.

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    First US LNG spot export cargo


    LNG player Cheniere, based in Houston, has reportedly sold its first spot LNG cargo last week. 

    Sources told Platts that the maiden trade was completed at $7.20 per mmBtu and the cargo will be delivered onboard the 162,000 cbm Clean Ocean LNG carrier in July to an Asian buyer.

    Cheniere has chartered the vessel from Dynagas on a five-year deal ending in the second quarter of 2020 with an option to extend the deal for additional two years. The vessel has been chartered together with two Teekay’s 173,400 cbm LNG carrier newbuilds under construction by Daewoo Shipbuilding & Marine Engineering of South Korea scheduled for delivery in the first half of 2016.

    Cheniere plans to market up to 5 mtpa of LNG from its US-based export projects through its office in Singapore.

    The Clean Ocean LNG carrier is currently on idle offshore Singapore, according to shipping data.

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    Sewage flow turns down in Bakken

    The population of a U.S. oil boomtown that became a symbol of the fracking revolution is dropping fast because of the collapse in crude oil prices , according to an unusual metric: the amount of sewage produced.

    Williston, North Dakota, has seen its population drop about 6 percent since last summer, according to wastewater data relied upon heavily by city planning officials.

    They turned to measuring effluent because it was a much faster and more accurate way to track population than alternatives such as construction permits, school enrollment, tax receipts or airport boardings.

    U.S. Census Bureau figures are usually too old as a full-fledged population count only happens once a decade, with sporadic updates in between. That’s not going to catch any swift changes in the population of cities like Williston.

    “Here in Williston, the growth rate is not predictable,” said David Tuan, director of the city’s public works department. “Measuring wastewater flow tends to be the most-efficient way to track population.”

    The recent high-water mark for Williston’s population was 33,866 in August of last year, just before the oil price collapse. Crude oil has fallen more than 50 percent in the past year and hurt many companies’ finances, leading to massive cost cutting, including the cancellation of projects and lay offs.

    By June of this year, the town had shrunk to 31,800 people, according to the sewage data.

    “I attribute that to the slowdown in oil prices,” said Tuan.

    Among the companies who have made big job cuts here are Halliburton Co and Schlumberger NV, alongside many smaller peers.

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    Oxy breaks silence

    Executives of Occidental Petroleum Corp., on Thursday reported finding savings by extracting more oil for less money and reinvesting that money in the Permian Basin, where the company is the biggest oil producer in the region.

    Oxy, as the company is known, saved about $450 million by cutting costs during the first half of the year, and it channeled that money into the Permian Basin, where crude production grew by about 78 percent in the second quarter compared to the same period last year.

    Incoming CEO Vicki Hollub attributed those efficiency gains to reduced drilling and completion times aided by technological improvements in geophysical modeling, drilling fluid systems and 3-D seismic imaging.

    In the Permian Basin, the company saw the time it takes to drill a well drop from about 40 days to about 20 days. Well costs dropped from $10.9 million to $6.8 million. Hollub said the goal is to shave another $600,000 off those costs.

    Oxy’s report represented the latest case of Permian Basin oil and gas producers showing they can continue to drive up production amid low oil prices. That is an upside for energy and production companies who depend on continued production gains, said Joseph Triepke, a financial analyst from Odessa and managing director of

    But building production in a region that already pumps more than 2 million barrels of oil per day offers little relief to the oilfield services companies who make up some of Odessa’s top employers, Triepke said. That’s because the price drop resulted in part from global oversupply, and worry mounts that continued production growth will put more downward pressure on oil prices.

    So far, Oxy executives reported that company managers shifted employees around rather than opt for shrinking their workforce.

    “In previous industry down cycles we’ve seen in the industry overreact through widespread layoffs,” Hollub said. “We’re taking a different approach with our response to lower oil prices and have deployed many of our engineers in the early stages of their careers out into the field where they have replaced contractors. They are successfully helping to optimize our base production, improve drilling times and gain on the ground experience.”

    In the first half of the year, Oxy executives reported drilling 47 wells — 42 of which were horizontal. And they placed 71 wells, some drilled before 2015, on production.

    Hollub pointed to two of those wells as some of the best-producing ever in the Permian Basin, producing about 2,400 boe per day at their peak rates. Both were in the Delaware Basin west of the Odessa-Midland area, including parts of New Mexico.

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    Alternative Energy

    France doubles size of solar tender after strong bidding

    France doubles size of solar tender after strong bidding

    France will double the amount of solar power capacity it will commission to be built in a tender after high demand and competitive prices emerged during bidding, the French energy ministry said on Thursday.

    It had launched a tender process for 400 megawatts (MW) of large, 250 kilowatt-peak (KWp) solar installations  in September last year, and will now authorise a further 400 MW in view of offers submitted before an end-June deadline.

    Almost 2,000 MW of ground-mounted capacity was offered, at prices that are for the first time as competitive as onshore wind tariffs, the ministry said in a statement.

    The results will be announced in a few weeks and selected projects will have two years to get off the ground, it added.

    Solar power capacity has grown slowly in France compared with Germany, Spain or Italy. It had 5.6 gigawatts (GW) of installed capacity at end-2014, compared with 38.2 GW in Germany. Last year, more capacity was installed in Britain than in France.

    But the government, which has just passed the final version of a long-delayed energy bill, intends to cut the share of nuclear power to 50 percent of the electricity mix in 2025, from the current 75 percent, the highest level in the world.

    Renewable energy, including solar, is expected to account for 40 percent by then.

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    Adani in talks with Softbank and Foxconn for solar power

    Adani in talks with Softbank and Foxconn for solar power 

    The Adani Group is reportedly in talks with Japan's Softbank and Foxconn for investment in a USD 3 billion project to make solar cells and panels in India.

    According to media reports, over the past few weeks, Mr Gautam Adani, Adani Group founder has had held talks with Mr Masayoshi Son, Softbank Chairman and Mr Terry Gou, Foxconn head.

    There is no official confirmation of talks by any of the parties so far.

    It may be recalled that two months ago Adani and US solar power company SunEdison ended a USD 4 billion agreement struck earlier this year for solar power projects.

    Adani is looking to set up a plant to produce 3 GW of solar cells and panels by 2020 and the location could be Gujarat.

    Softbank, Foxconn and Bharti Enterprises have already pledged to invest about USD 20bn in solar projects in India.
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    US Wind Energy Selling At Record Low Price of 2.5 Cents per kWh

    US Wind Energy Selling At Record Low Price of 2.5 Cents per kWh

    Wind power prices have dropped down to an all-time low of just 2.5 cents per kWh, far below the average national average of around 11 cents per kWh, according to the DOE's 2014 ¨Wind Technologies Market Report.¨

    The all-time low is the weighted average of prices offered to utility buyers from projects negotiating contracts in 2014. The majority were located in the interior of the U.S., an area that includes states such as Oklahoma and Texas where wind-power potential is highest, Mark Bolinger, study co-author and Berkeley Lab Electricity Markets and Policy Group research scientist Mark Bolinger pointed out in an interview.

    "One important thing to note is that the majority of wind power development that has taken place in the last few years in the interior U.S. – you're not going to get those sorts of prices in the Northeast or other areas where wind power resources aren't as strong and projects are costlier to develop."

    Taller Turbines and Bigger Rotors

    2014's record-low wind power PPA prices resulted from a confluence of several factors, Bolinger continued. For one thing, the declining trend in wind power prices has continued since they hit a 2009 peak of around 7 cents per kWh.

    Ongoing technological advances were another contributor. ¨Taller turbines with larger rotors have resulted in higher average power capacities for wind turbine power capacities,¨ Bollinger said.

    "Wind energy prices — particularly in the central United States — have hit new lows, with utilities selecting wind as the low cost option," Berkeley Lab Senior Scientist and report co-author Ryan Wiser said. "Moreover, enabled by technology advancements, wind projects are economically viable in a growing number of locations throughout the U.S."

    Key findings from the latest "Wind Technologies Market Report" include:

    Wind power has comprised 33 percent of all new U.S. electric capacity additions since 2007, now meets almost 5 percent of the nation's electricity demand, more than 12 percent of total electricity generation in nine states and more than 20 percent in three states.

    In the last 15 years, the average nameplate capacity of wind turbines installed in the U.S. has increased by 172 percent, to 1.9 MW in 2014;  the average turbine hub height has increased by 48 percent (to 83 meters), and the average rotor diameter has increased by 108 percent (to 99 meters).
    Wind turbine prices have fallen 20 to 40 percent from their highs back in 2008, and these declines are pushing project-level costs down. Wind projects built in 2014 had an average installed cost of $1,710 per kW, down almost $600 per kW from the peak in 2009 and 2010.

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    China's solar manufacturing output tops $31 bln in H1 -ministry

    China's solar manufacturing output tops $31 bln in H1 -ministry

    The value of China's total solar photovoltaic (PV) manufacturing output topped $31 billion in the first half of 2015, the industry ministry said on Wednesday, as the push for renewable energy continues in the world's largest solar PV producer.

    In the first half of 2014, the total output value surpassed 150 billion yuan ($23.44 billion).

    China, the world's top greenhouse gas emitter, has committed to halting the rise in CO2 within the next 15 years to help build a United Nations climate deal in late 2015.

    Total output value surpassed 200 billion yuan ($31.26 billion) in the January-June period, the Ministry of Industry and Information Technology (MIIT) said in a statement on its website (

    China also exported $7.7 billion worth of silicon wafers, batteries and modules in the first half of 2015, compared to $8.2 billion during the same period last year.

    It produced 74,000 tonnes of crystalline silicon, up 15.6 percent compared to the same period last year, and produced 4.5 billion silicon wafers, up slightly, the statement said.

    Domestic solar companies, some already heavily indebted, will need to raise many billions of dollars this year to fund a big expansion in capacity, a major test of investor confidence in a sector hit hard by the global financial crisis.

    China increased its domestic solar power capacity by 7.73 gigawatts (GW) in the first six months of 2015, the country's top energy regulator said in July, leaving new installations short of the half-way mark for this year's target as growth slowed in the second quarter.

    The government aims to raise the share of non-fossil fuels to 15 percent of its total energy mix by 2020 from around 11 percent at the end of 2014 as part of efforts to ease its dependence on coal and meet its climate pledges to the U.N.

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    A Solar-Energy Giant Rises From the Rubble of Lehman Brothers

    A Solar-Energy Giant Rises From the Rubble of Lehman Brothers

    Seven years ago, Kerry Adler watched as the disaster at Lehman Brothers Holdings Inc. scuttled his vision of renewable-power riches. Today, he has reassembled assets from the collapsed investment bank, laying the foundation for a green-energycolossus.

    Adler’s SkyPower Ltd. has lined up deals to build utility-scale solar farms in North America, Asia and Africa worth more than $12 billion — though how the projects will be financed remains a mystery.

    To date, SkyPower has completed 23 projects totaling 300 megawatts, ranking it just 34th among solar developers worldwide, according to Bloomberg New Energy Finance. But if Adler is successful in fulfilling all of his signed contracts, he will have more renewable power capacity than any operator currently has.

    SkyPower aims to “kickstart this market in the hope of bringing power to people that really deserve it,” Adler, 50, said by phone from Kenya as he wrapped up his second major deal this year.

    To date, SkyPower has completed 23 projects totaling 300 megawatts

    That was a $2.2 billion pact for 1 gigawatt of solar — about the capacity of a typical nuclear reactor, and massive for renewables — that will take years to build. SkyPower has also begun a joint venture in Mexico, and within two months expects two more deals in the Middle East and Africa, each about as big as the Kenya contract.

    SkyPower has projects with a total capacity of about 25 gigawatts in the works, and Adler says he can build 7 gigawatts within five years. Even that would make it far larger than the biggest developers of commissioned solar projects: China’s Huanghe Hydropower Development Co Ltd., which has 2 gigawatts, and Arizona-based First Solar Inc., with 1.2 gigawatts, according to Bloomberg data. In terms of projects in the pipeline, only Missouri-based SunEdison Inc. is bigger, with deals representing 53 megawatts on the table.

    Lehman Collapse

    “The next question is what is your probability rating — how likely is it that those projects will get built,” said Michael Morosi, a solar-industry analyst at Avondale Partners LLC in Nashville, Tennessee. He called SkyPower’s ambitions “a stretch goal.”

    Adler founded SkyPower in 2003 after a stint as chairman of outsourcing firm Sitel Canada.  Lehman bought a majority stake in SkyPower in 2007. Lehman’s collapse the following year choked off credit to SkyPower, which itself sought protection from creditors in 2009.

    Since then, Adler has wrapped up Kenya and other contracts with a total potential value of $7.2 billion. In Egypt, he has promised to build 3 gigawatts, and in India SkyPower has deals to provide 350 megawatts.

    SkyPower offered “a very good rate, and we are hopeful that they will fulfil the contract,” said Manu Srivastava, commissioner for clean energy in Madhya Pradesh, one of two Indian states where Adler has deals.

    Financing Questions

    Despite Adler’s success in getting contracts, it’s unclear whether he’ll secure financing, said Jenny Chase, solar analyst at Bloomberg New Energy Finance. Many such agreements have scant repercussions for companies that fail to get financial backing and build the promised installations, she said.

    “Developers go around signing deals with countries and anyone else who might buy power from them,” Chase said. “A lot of those deals won’t come off.”

    SkyPower is the largest and one of the most successful developers and owners of utility-scale solar photovoltaic (PV) energy projects in the world
    SkyPower says it has worked with “leading bankers to the renewable industry,” though Adler declined to name them. He wouldn’t say whether there are any penalties in his contracts, but he insists SkyPower can line up the financial backing it needs.
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    Solar Cell Efficiency Could Double with Novel “Green” Antenna

    Solar Cell Efficiency Could Double with Novel “Green” Antenna

    “Most of the light from the sun is emitted over a very broad window of wavelengths,” says Challa V. Kumar, Ph.D. “If you want to use solar energy to produce electric current, you want to harvest as much of that spectrum as possible.”

    But the silicon solar cells people buy today are not very efficient in the blue part of the light spectrum. So Kumar’s team at the University of Connecticut built an antenna that collects those unused blue photons and then converts them to lower energy photons that the silicon can then turn into current.

    “Many groups around the world are working hard to make this kind of antenna, and ours is the first of its kind in the whole world,” he says.

    Commercial solar cells do a good job of converting light from about 600 to 1,000 nanometers (nm) into electric current but not from the 350 to 600 nm range. That’s part of the reason solar cells on the market today are only about 11 to 15 percent efficient. High-end panels can reach 25 percent efficiency but are unaffordable for most customers. Lab prototypes can reach even higher efficiencies but are difficult to scale up.

    Converting the mostly unused portion of the light spectrum to wavelengths solar cells can use in an affordable way is far from a simple task. To tackle this problem, Kumar turned to organic dyes. Photons in light excite dye molecules, which can then, under the right circumstances, relax and emit less energetic but more silicon-friendly photons.

    But to get dye molecules to work together, they need to be wrapped individually and densely, while satisfying certain quantum mechanical requirements. To address this issue, they embed the dyes inside a protein-lipid hydrogel by mixing them together, warming them up and then cooling them to room temperature. With this simple process, the material wraps around individual dye molecules, keeping them separated while packing them densely. Rather than creating a radio-like antenna, however, the procedure results in a thin, pinkish film that can be coated on top of a solar cell.

    “It’s very simple chemistry,” Kumar says. “It can be done in the kitchen or in a remote village. That makes it inexpensive to produce.”

    These antennas are made with biological and non-toxic materials that are edible in theory, Kumar says. “Not that you would want to eat your solar cells, but they should be compostable so they won’t accumulate in the environment,” he says.

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    Will solar panels save you money? Ask Google

    Will solar panels save you money? Ask Google

    Google has launched a pilot project to help US householders find the best solar plan installation.

    Project Sunroof creates a personalised roof analysis for customers interested in buying solar panels.

    Those who want to take part in the programme need to provide their address and the company will use Google Maps to collect information.

    It will calculate how much sunlight hits a roof per year and depending on different factors such as temperature, shadows and the positions of the sun over the course of a year it will recommend an installation size.

    It aims to help householders generate close to 100% of their electricity use.

    The tool works out how much money a householder could potentially save by installing solar panels and connects them with local solar providers.

    In a statement Google said: “As the price of installing solar has gotten less expensive, more homeowners are turning to it as a possible option for decreasing their energy bill. We want to make installing solar panels easy and understandable for anyone.”
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    Documents Confirm Apple Is Building Electric iCar!

    Documents Confirm Apple Is Building Electric iCar!

    Finally, we have the confirmation about Apple Electric iCar. Now we can prepare ourselves to the overnight rEVolution and mass market for EVs with Apple brand power behind it. We have first Trillion market cap company in the making: Apple has finally found the place where to park its cash and brilliant team of designers and engineers, its powerful branding and distribution channels will bring EVs to the masses. Low cost manufacturing base will help as well, China Yuan devaluation is very timely and you can check on my entries below about Foxconn. This largest producer of iPhones and iPads is building its own Megafactory for mass production of lithium batteries and investing almost one billion dollars in the $15k Electric Car to be produced in China.
      Lithium technology is already here, I was always advocating for Apple to buy the time to market and if not buy Tesla Motors outright, than to create the strategic partnership and use Tesla Model 3 power-train. Lithium is the magic metal which is at the heart of this rEVolution. Now we have the tide coming, all cars will be electric.
     Electric cars are not just about style and incredible performance - only they can keep us the right to personal mobility without killing everything around. It is not about money or new advance economy any more - it is about survival. U.S is moving very slowly in that direction, but I just read that 16 states are trying to block Obama's Clean Power Plan. Dollar can still open a lot of doors and dirty politicians hearts (if they have any). China is not a blessing in a lot of issues, but at least "they get it" - you cannot built the new economy with Q by Q performance. You need long term plan in place. They have one: electric cars are the strategic industry now. Under the radar screens the best technology is brought into the country, the best lithium deposits are acquired and the best lithium facilities are being built. Now China controls 75% of Hydroxide Lithium, which goes in the EVs batteries.
      International Lithium is working with Ganfeng Lithium, which supplies Panasonic for its cells for Tesla Motors lithium batteries and companies like BYD, Boston Power and LG Chem. It is very tough now in junior mining space, but I am very proud that our Team has managed not only to save our projects, but is rapidly developing them. Financing and technology from Ganfeng Lithium makes all the difference for us. We are making world the better place.
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    SunEdison, Goldman Sachs funds form $1 bln investment vehicle

    SunEdison, Goldman Sachs funds form $1 bln investment vehicle

    U.S. solar company SunEdison Inc said it would form a $1 billion warehouse investment vehicle along with funds managed by Goldman Sachs Group Inc to fund construction and buy operating assets.

    West Street Infrastructure Partners III and its affiliates, managed by Goldman Sachs, will provide $300 million equity for the investment vehicle, WSIP Warehouse, SunEdison said.

    A syndicate of banks including Morgan Stanley, Bank of America Corp and Deutsche Bank AG will provide commitments of $700 million debt. Of this, $500 million will be a five-year term loan and $200 million a four-year revolving credit facility.

    SunEdison will have the option to expand the facility by up to $1 billion.

    "The WSIP Warehouse expands our capacity beyond our existing $1.5 billion First Reserve Warehouse and the $500 million dollar TerraForm Private Warehouse," SunEdison Chief Financial Officer Brian Wuebbels said on Monday.

    TerraForm Power Inc, a unit of SunEdison, will have an exclusive call right over the warehoused assets, the company said.

    SunEdison agreed in July to buy Vivint Solar Inc, the second-biggest U.S. solar panel installer, in a deal valued at about $2.2 billion to speed up its expansion in the booming residential solar market.
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    Utilities Muscle in to Rooftop Solar Market

    Utilities Muscle in to Rooftop Solar Market

    In the past five years, rooftop solar has revealed the limitations of the archaic electric utility business model, as customers have found generating their own power more cost effective than taking 100% of their energy from the incumbent monopoly. For years, utilities have fought back by trying to make competition less cost effective, at a substantial cost to their image (and ratepayer’s own money).

    It was only a matter of time until electric monopolies realized that co-opting would be less costly than confronting, and several utility companies are now planning to own solar on their customers’ roofs. Southern Company CEO Tom Fanning put it bluntly, “If distributed generation is eroding your growth, own distributed generation!”

    The big question is: Will utility-owned rooftop solar add to or replace customer ownership of solar?  And secondarily, is this a good deal for utility customers?

    Tucson Electric Power, based in the sunniest part of the U.S., received regulatory approval for a residential solar program in 2014. The 600 arrays they’ve proposed will average 6 kilowatts.  The cost of TEP’s program is estimated at $10 million for a cumulative capacity of up to 3.5 megawatts of solar capacity. The utility says it will be between $2.85 and $3.50 per Watt.

    Customers pay a one-time $250 application fee and a monthly fee equivalent to their average utility bill payment over the past 12 months. Customers receive the electricity from the solar array as bill credits, with the system sized to their annual average use. Thus, the only savings for customers will be if utility rates rise (they have by 2.8% per year since 2008).

    ILSR’s analysis suggests that it will take customers about 5 years to pay back the program application fee, and that the net benefit to the customer over 25 years will be about $6,800.

    Arizona Public Service has also planned a residential solar offering. It’s program will provide 1,500 customers a $30 monthly credit over 20 years, with no upfront fee. The program is anticipated to cost $28.5 million for 10 megawatts of solar, for an average installed cost of $2.85 per Watt.

    ILSR’s calculation of net benefit suggests that customers will gain about $5,600 over 25 years from the APS program (adjusted for the time value of money and inflation), with no payback period because the customer has no upfront costs.

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    Hanergy says may post loss after cancelling deals with parent

    Hanergy says may post loss after cancelling deals with parent

    Hanergy Thin Film Power Group Ltd (HTF), under investigation by Hong Kong's share market regulator, said on Sunday it may record a loss for the first half of the year after suspending or terminating a large number of sales to its parent company and affiliates.

    Its unlisted Chinese parent, Hanergy Holding, buys solar panel-making machines from HTF and then makes solar panels for sale to third parties.

    But HTF said in a statement on Sunday that the cancellation of those deals have resulted in a substantial decline in the income arising from connected transactions during the period to around HK$200 million ($25.79 million), an over 90 percent drop from a year ago.

    "The Securities and Futures Commission (SFC) was concerned about the ongoing viability of the group given its financial dependence on (parent) Hanergy Holding Group Limited and its affiliates," HTF said in the statement to stock exchange.

    "Therefore the Company has suspended or terminated the majority of connected transactions with the member companies and other affiliates of Hanergy Holding."

    The company said last month it may launch a judicial challenge to a decision by the SFC to suspend trading in its shares, after the Hong Kong exchange said it had been directed by the securities regulator to extend a nearly two-month share trading suspension on HTF following a plunge in its share price in May.

    HTF's first-half revenue and net profit in 2014 were HK$3.2 billion and HK$1.7 billion, respectively.
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    US ethylene at a six-year low on oversupply, high run rates

    US ethylene at a six-year low on oversupply, high run rates

    August US spot ethylene fell 2 cents/lb Thursday to 23.75-24.25 cents/lb FD USG for August deliveries on continued talk of declining downstream derivative prices, weak energy complex, lengthening supply and inventories.

    Thursday's assessment is the lowest since August 3, 2009, when the spot price was assessed at 23.75 cents/lb, Platts data show.

    In active trading on Thursday, August was traded twice in the morning at 25 cents/lb MtB Wms and at 24.25 cents/lb MtB Wms, while in the afternoon August was traded at 24 cents/lb MtB Wms and 25 cents/lb MtB-other.

    After close of assessment, one August deal was concluded at 23.75 cents/lb MtB Wms, while January traded at 25.375 cents/lb MtB Wms.

    Prices have seen downward pressure since late September, when a number of production expansions started up.

    Early January brought more bearishness when a major transmission line was shut for repairs.

    Six expansions with total capacity of 2 billion lb have been brought online in the past year, pushing the total annual US ethylene production to over 61.7 billion lb/year, according to Platts data.

    This boosted capacity has been met with little corresponding downstream expansions, resulting in oversupply.

    US Gulf Coast producers are experiencing a rather uneventful 2015 to date, with ethylene prices holding to a range of 32.75-42 cents/lb until late July.

    Prices have recently dropped 9.125 cents/lb (or 28.6%) from the 33.625 cents/lb assessment on July 31 to Thursday's 24 cents/lb.

    By contrast, in the same period in 2014 -- January to early August -- ethylene prices were in a much wider range of 49.75-70 cents/lb, before a number of unplanned outages in third-quarter 2014 pushed prices to a record high in mid-September of 76.25 cents/lb FD USG, Platts data showed.

    Sources also pointed to high US production rates. Second-quarter ethylene production was 14.441 billion lb, up 695.6 million lb from Q1 and up 983.3 million lb from Q2 2014, according to American Fuel and Petrochemical Manufacturers data.

    Second quarter production was the highest quarterly output since fourth quarter 2004's 14.831 billion lb, the AFPM report showed.
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    Renewables, Coal, Gas and all things Electric.

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    Sun Edison collapse?

    SunEdison (NYSE:SUNE) has experienced a disastrous past month, with the stock price approximately halving during this time period. With a growing number of acquisitions and businesses, SunEdison is clearly making investors more wary of a possible overextension. SunEdison's recent Q2 earnings results only further stoked this sentiment, as the company reported a whopping $263M in net losses. Despite the fact that the company crushed its growth guidance, delivering 404 MWs of solar/wind projects during the quarter, losses are clearly becoming a focal point for investors.

    With 8.1 GW of pipeline projects and a growing number of businesses, investors are right to be increasingly focused on losses. As debt has been one of the primary reasons for solar bankruptcies over the past decade, growth may become irrelevant if the company's losses keep piling up. With debt levels starting to surpass the double digit billions, SunEdison is clearly one of the riskier solar plays. While SunEdison is still likely undervalued at current valuations(especially after its recent drop), the risks associated with this stock are only rising. Some of the downsides of SunEdison's incredibly ambitious approach are finally started to show.Image title

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    Russia's Uralkali considers share buyback, delisting

    Russia's Uralkali considers share buyback, delisting

    Russia's Uralkali , the world's biggest potash producer, will consider a new share repurchase programme next week, potentially leading to a delisting, the company said on Friday.

    Uralkali has already spent $1.1 billion this year on a buyback that decreased its free float to 23 percent and increased the number of treasury shares, representing stock that has been bought back and is retained by the company.

    It said in June that it had asked its audit committee to review the benefits of having its global depositary receipts (GDRs) listed on the London Stock Exchange (LSE) and present its recommendations by the end of August.

    The audit committee, which Uralkali said has also been evaluating a possible share repurchase programme, will present its recommendations for consideration by the board on Aug. 24, the company said in a statement on Friday.

    A decision has yet to be made, the company said, but it added that a further decrease in the free float of its GDRs on the LSE could lead to a delisting.

    Russian business daily Vedomosti reported on Friday that Uralkali would have to delist from the LSE if it buys back 10 percent of its shares from the market because that would lead to its free float dropping below the LSE's requirements.

    News agency Interfax had reported earlier that Uralkali might spend a further $1 billion to $1.5 billion on a share buyback and Vedomosti had said it could delist its shares by year-end and merge with shareholder Uralchem.

    Mikhail Prokhorov's Onexim owns a 20 percent stake in Uralkali, Chengdong Investment Corporation holds 12.5 percent and Uralchem owns 19.99 percent. Treasury shares account for 24.2 percent. The rest is in free float.
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    K+S secures major potash supply deal from its Canadian Legacy mine

    K+S secures major potash supply deal from its Canadian Legacy mine

    German fertilizer company K+S AG has won a deal to supply about 25% of the projected output from its Legacy potash mine in Saskatchewan, Canada, to a U.S distributor.

    “We are seeing enormous interest in potash from our Legacy mine both from existing and new customers,” K+S board member Andreas Radmacher said in a statement.

    The agreement grants Koch exclusive rights to 453,000 metric tonnes a year of the output from Legacy

    The agreement grants Koch exclusive rights to 453,000 metric tonnes a year of the output from Legacy, which is expected to produce about two million tonnes of potash annually by the end of 2017.

    The deal with Kansas-based Koch Fertilizer comes as the European firm attempts to fend off a takeover bid from Potash Corp. (TSX:POT), which in K+S view undervalues the project.

    Potash Corp., the world’s second-largest producer of the fertilizer ingredient, is hoping to take over rival K+S, as global competition among sellers deepens.

    The German company, which has rejected two takeover bids by Potash Corp. so far, has spent two billion euros on its Legacy project, located in southern Saskatchewan. The development, the first potash mine being built from scratch in 40 years, is expected to begin mid-2016.

    Last week, K+S said it remained open to a tie-up with the Canadian giant if the terms of Potash Corp.’s unsolicited offer change.

    If the merger succeeds, Potash Corp. would regain some of its historic dominance over the fertilizer market, as the two combined companies would account for 30% of global potash production.
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    Precious Metals

    Is this gold price jump the turning point?

    Is this gold price jump the turning point?

    On Thursday, gold shot up to a five-week high after dovish comments from the Federal Reserve threw fuel on currency fires already burning bright around the globe.

    In afternoon dealings in heavy volume gold futures with December delivery dates were priced at $1,153.10 an ounce in New York at its highs for the day and up $25.30 or 2.2% from Wednesday's close. Gold is now up 6.4% from a more than five-year closing low of $1,084 struck August 5.

    China's shock currency devaluation that sent ripples through commodity dependent economies last week sparked the rally, while Fed minutes released on Thursday that indicated a rate hike is less likely in September led to a sell-off in the dollar,  increasing jitters on currency and stock markets.

    Backwardation is a rare and un-natural phenomenon in gold and certainly indicates something is afoot of a bullish nature"

    The dollar remains 17.5% higher against major world currencies and gold's resurgence may have more to do with recent developments on the New York Comex market which has moved into uncharted territory.

    Last week large gold futures investors such as hedge funds, referred to as "managed money", continued to hold near record short positions– bets that gold could be bought cheaper in the future – and added only slightly to  longs.

    According to the Commodity Futures Trading Commission's weekly Commitment of Traders data speculators' short positions  was down slightly to more than 11.4 million ounces (323 tonnes), while longs grew by less than 600,000 ounces.

    On a net basis hedge funds remain short of the metal, a position entered into during the week to July 21 – the first time since at least 2006, when the data was first being tracked.

    Any sustained move higher could see a scramble for gold on futures markets as traders cover short positions, but analysts are reluctant to call it a decisive turning point for the metal.

    Ross Norman of Sharps Pixley, a large London bullion dealer, says apart from the record shorts, the strong buying of gold options with a strike price of $1,200 "clearly suggests some players see considerable upside from here."

    Other factors are pushing gold higher this week.

    The market is in backwardation and spot gold is trading higher than gold for delivery in the future which suggests there is real tightness in the physical market.

    "Backwardation is a rare and un-natural phenomenon in gold and certainly indicates something is afoot of a bullish nature," says Norman, the London Bullion Market Association most accurate annual forecaster coming in as the outright winner five times and a runner up four times.

    Sharps Pixley is owned by Germany's Degussa, Europe's top precious metals trader which revealed this week that demand for bars in Germany, the world's third largest market after India and China and twice the size of the US, is up 50% compared to last year.

    Norman does however suggest "cautious optimism":

    "Gold prices have been horrifically elastic these last 3 years and "momentum fade" has deeply eroded the confidence of the most die-hard bull.

    "We don't yet have a bull market in place in our view but a figure above the $1240 will certainly give many renewed confidence – which could potentially be self-reinforcing, just as was between 2000 and 2008 when the market clipped along at a 12% year on year gain well before any of us had heard the words "sub-prime" even."

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    Polyus Gold beats forecasts with doubled first-half net profit

    Polyus Gold beats forecasts with doubled first-half net profit

    Polyus Gold, Russia's largest producer of the yellow metal, said on Thursday its first-half net profit more than doubled on the back of higher sales and revaluation gains on derivative financial instruments.

    Polyus, controlled by billionaire Suleiman Kerimov and his partners, has been supported by its gold price hedging programme which helped offset lower bullion prices.

    Net profit rose to $583 million, beating analysts' average forecast of $342 million, while adjusted net profit jumped 89 percent from the year before to $432 million.

    Polyus said its 2015 production would be closer to the upper end of its expected range between 1.63 million and 1.71 million ounces. It also said it would take part in a state tender for Sukhoi Log in the Irkutsk region of Siberia, one of the world's largest untapped gold deposits, if it was announced.

    Sukhoi Log has remained untapped for half a century and Russia has been considering selling rights to the deposit for almost 20 years. "We are expecting news from the regulator and will apply for the auction in case the licence for the deposit appears," Chief Executive Pavel Grachev said.

    Polyus is also reviewing its project to develop one of the world's largest untapped deposits, Natalka in Russia's far east, and plans to provide an update on the project in the autumn.

    Its total 2015 capital expenditure is expected to be lower than in 2014, when it stood at $525 million.

    The company's revenue grew 1 percent to $1.0 billion, while adjusted core earnings or EBITDA rose 50 percent to $589 million due to the rouble weakening and cost optimisation.
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    Greece halts operations at Canada’s Eldorado Gold mine

    Greece halts operations at Canada’s Eldorado Gold mine

    Greece's authorities have temporarily suspended work at one of the mines run by Canada’s Eldorado Gold in northern Greece after determining the company had violated some terms.

    According to the country’s energy and environment minister, Hellenic Gold — a subsidiary of the Vancouver-based company— infringed the terms of technical studies. The revocation of those studies approvals, Panos Skourletis added, meant work in the gold-copper Skouries mine must stop for now, Agence France Presse reports. He didn't provide further details.

    The Skouries mine has had locals divided since early 2011, when the Vancouver-based firm’s subsidiary Hellenic Gold received government approval to mine in the northern peninsula.

    Some claim the mine, owned 95% by Eldorado, may hurt tourism and the environment, while others believe the operation is good news for Greece because it will generate new jobs and bring hundreds of millions into the struggling economy.

    Truth is Skouries was the flagship project of the last government’s foreign investment drive and, for many, remains a test case that would reveal whether Greece could protect foreign investors despite local opposition.

    Eldorado has invested more than $450 million since 2012 on construction and development of the Skouries and Olympias mines in Greece, and had planned to invest another $200 million this year to advance construction at Skouries.

    In April, one of Greece's top courts has handed a key victory to the Canadian gold miner, rejecting a decision that blocked Eldorado's plans to build a key processing plant at Skouries.
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    Big diamonds--ok, small diamond death.

    Prices for Gem Diamonds Ltd.’s stones that are larger than 10 carats have fallen about 3 percent in the first half of this year, Chief Executive Officer Clifford Elphick said by phone on Wednesday. That compares with declines of about 30 percent for smaller gems.

    “The big stones seem to be holding up their value,” Elphick said.

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    Now I am depressed.

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    AngloGold harvesting short-life mines

    AngloGold harvesting short-life mines 

    AngloGold Ashanti is harvesting short-life gold mines for cash and will do so with more mines if the gold price falls below $1 000/oz, CEO Srinivasan (Venkat) Venkatakrishnan said on Monday. Already being harvested after a falling gold price put an end to disposal negotiations are the Sadiola and Yatela gold mines in Mali, in which AngloGold has stakes of 41% and 40%. 

    If the gold price falls below $1 000/oz, more will follow. “We’ll look to harvesting them for cash until the crisis improves,” Venkat told the presentation attended by Mining Weekly. CFO Christine Ramon reported that currency effects more than compensated for the drop in the gold price and inflationary pressures in the three months to June 30. 

    Weaker national currencies against the dollar contributed to the reduction in operating costs in South Africa, Australia, Brazil and Argentina. Ramon said that AngloGold's net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio of 1.44 was positioning the company well to withstand gold price volatility as well as production disruptions, within reason. 

    In the second quarter 84% of AngloGold’s Ebitda was generated by its international operations, which contextualises the low potential impact of a production disruption in the South African region through strike action. “I’m hoping that we don’t end up with a strike scenario because we’ve just seen the damage that has been done to the platinum industry on the back of a strike. “In the event that our workers want to go on strike, I’m just pointing out the diversified nature of our operations and their ability to withstand a strike,” Venkat commented.

    International operational head Ron Largent reported that AngloGold’s international operations accounted for some 70% of the company’s overall production. “We’ve continued to improve margins even with the reduced gold price,” Largent reported. AngloGold’s South African operations produced 18% less gold at 261 000 oz, on mainly safety stoppages at both the West Wits and Vaal River regions. “It’s like having an accident on a motorway. There are two approaches you can take. You can shut the entire motorway down or you can ring-fence the area where there is a problem and address that particular problem. “What you are hearing the industry say is identify the area where there is a problem and let’s deal with it rather than taking one approach across the entire industry. 

    Presenting cash-generative financial results for the three months to June 30 despite the falling gold price and decreased production, AngloGold reported cutting total cash costs to $718/oz, lowering net debt to $3.076-billion, lifting liquidity by selling its US Cripple Creek & Victor (CC&V) gold mine for $820-million and producing 6% less gold production on the cessation of underground mining at Obuasi in Ghana and the sale of the Navachab gold mine in Namibia.

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    Base Metals

    First Nickel goes into receivership

    First Nickel goes into receivership 

    Legal firm KSV Kofman has been appointed as the receiver of First Nickel after the company’s principal secured lender Resource Capital Fund demanded repayment of all of the obligations owing to it, enforcing its security under the Bankruptcy and Insolvency Act of Canada. 

    The Ontario Superior Court of Justice made an order appointing KSV, following extensive discussions between First Nickel and its secured lenders. As a result of the court order, all of the First Nickel directors and president and CEO Thomas Boehlert resigned on Thursday, having agreed to remain available to assist the receiver. 

    First Nickel first signaled in June that the Lockerby nickel mine, in the Sudbury basin of Ontario, would be placed on care and maintenance or closed during the third quarter, after all remaining nickel ore above the 6 800-foot-level had been exhausted. It had systematically been laying-off workers over the last several weeks. 

    Weak nickel prices had rendered the mine uneconomic and prompted it to immediately suspend a ramp development program required to continue accessing deeper reaches of the ore deposit. 

    First Nickel had acquired the Lockerby mine from Falconbridge in 2005, before idling it in 2008, when nickel prices fell from 26-year highs of about $23/lb. The operation restarted in September 2011, when the price of nickel again trended higher. Lockerby was considered one of the highest-grade nickel operations in production in the Sudbury basin. 

    FNI had an offtake agreement with Glencore Canada, that bought all the ore for processing.
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    China Zhongwang sees short-seller report helping its development

    China Zhongwang sees short-seller report helping its development

    China Zhongwang Holdings Ltd , the world's second-biggest maker of industrial aluminium extrusion products, is thankful for a report by a short seller alleging it doctored its books, its executive director said on Thursday.

    "Whether it is good or bad, it will help our development in the future," Lu Changqing told reporters in Hong Kong, saying the allegations by previously unknown short-seller Dupre Analytics showed his company's importance.

    Zhongwang halted trade and issued a detailed denial last week after Dupre accused it of inflating its sales by sending shipments to companies it controls offshore.

    "We should be thankful for the report," Lu said, without saying how it would help his company's development. He added that his company would like to talk to Dupre but did not know how to get hold of them.

    Zhongwang said last week it reserved the right to take legal steps in relation to the matters arising from the report, including commencing formal legal proceedings.

    Lu said on Thursday the Dupre report had no impact on its operations.

    He said the multi-year lows of aluminium prices were due to slow domestic economic growth and not the result of Chinese exports of semi-finished aluminium products since around 90 percent of China's production stayed at home.

    The global aluminium industry should seek ways to boost consumption of the metal rather than focus on accusing China of exporting the metal to push prices down, he said.

    Zhongwang was looking to increase production of aluminium products for the transportation sector, Lu said, adding that the company was seeking opportunities to buy firms that make aluminium parts or structural designs for cars in the United States and Europe.

    Zhongwang posted a net profit of 1.5 billion yuan ($235 million) in the first half of 2015, up 18 percent from a year ago, the company said in a statement on Thursday.

    The company produced about 350,000 tonnes of aluminium extrusion products - objects with a definitive cross-sectional profile - in the first half of 2015, of which about 45,600 tonnes were exported.

    It currently has about 1 million tonnes of annual capacity to make the products and will add 1.8 million tonnes.
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    Tenge tumble allows Kaz Minerals to cut cost forecasts

    Tenge tumble allows Kaz Minerals to cut cost forecasts

    Kazakh copper producer Kaz Minerals cut its cost forecasts for the year, helped by a weaker tenge currency, and the prospect of more benefits sent its shares soaring on Thursday.

    Kaz, which is listed on the stock market in London, said the decision to introduce a floating exchange rate in Kazakhstan announced on Thursday could help it to lower costs further if the currency continues to weaken.

    The company, which pays its bills in the local tenge currency but makes revenues in U.S. dollars, reduced its full-year forecasts for production costs to 260-280 U.S. dollar cents per pound from 280-300 cents earlier.

    Those adjustments were based on a tenge rate of 170-198 per dollar, the miner said. The currency weakened to 257.20 per dollar on Thursday in response to the policy shift.

    "We are not able to tell you any level we should expect, it's a free float exchange rate.(Tenge weakness) will help us because about 60 percent of our costs are in tenge," Chief Executive Oleg Novachuk told journalists in a conference call.

    Kaz shares were up 13 percent as of 1045 GMT, outperforming a 2 percent rise in the FTSE 350 mining index.

    "We attribute this reaction to expectations that some of the cost benefits of a currency depreciation would be retained by the company," Morgan Stanley analysts said in a note.

    "However, we maintain that cost benefits of a weaker currency are typically eroded by an increase in underlying inflation."

    "We thought the company might run a bit short of money in 2017, but the devaluation of the tenge could go some way to offset those concerns," said Ed Sterck, an analyst at BMO Capital Markets.

    The company said it was on track to achieve its 2015 copper cathode production target of 80,000 to 85,000 tonnes.

    Kaz plans to grow its copper output to about 300,000 tonnes by 2018 through three new projects: Bozshakol, Aktogay and Koksay.

    The commissioning of its Bozshakol project in northern Kazakhstan, initially expected in the fourth quarter of this year, was now expected in the first quarter of 2016, following a fire there this month.
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    Copper breaks secular uptrend too.

    Image title
    Given its widespread use in manufacturing and construction coupled with the fact that China consumes 45% of the world's supply, copper has been bearing the brunt of this bearishness.

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    China copper smelters seek higher concentrate fees on weak yuan

    China copper smelters seek higher concentrate fees on weak yuan
    Large copper smelters in China are seeking higher charges on imports of spot raw material concentrate after the yuan depreciated last week and because of low metal prices, people in the industry said.

    Higher requirement by Chinese smelters, top buyers of spot concentrate in the international market, has pushed up spot treatment and refining charges (TC/RC) about 10 per cent from last month. But the move could cut concentrates the smelters can buy from the international market.

    "The depreciation of yuan makes costs of concentrate imports higher," an executive at a large copper smelter said, who declined to be named due to the company's policy.

    TC/RC are paid by sellers of concentrate to Chinese smelters and then are deducted from the smelters' buying price based on metal prices on the London Metal Exchange. Charges rise when supply rises or demand falls as sellers compete for buyers. Higher charges increase margins at smelters. In early July, large smelters agreed to try not to take spot standard grade imports below TC/RC of $90 per tonne and 9 cents per pound for the third quarter.

    But traders said the smelters did not accept those levels this week. Smelters had bought spot concentrates with TC/RCs of about $92-$93 and 9.2-9.3 cents for delivery in the fourth quarter and were not keen to take deliveries for the current quarter.

    Global traders offered $80-$85 and 8-8.5 cents last month. The smelters were asking $94-$95 and 9.4-9.5 cents mostly, prompting some global traders to cut offers, said an executive at an international trading firm.

    Another reason why smelters ask higher TC/RC is low metal prices that have hovered around six-year lows since last month in the Chinese and international markets. "When metal prices were high and we made good profits, we could accept a lower TC/RC. But now we cannot afford it," the smelter executive said.

    Some smelters have already slowed production after low metal prices prompted suppliers of concentrates and scrap to cut spot sales in the domestic market, industry sources said. China's refined copper production dropped 4.5 per cent in July from June.
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    Glencore forecasts weak metals outlook

    Glencore forecasts weak metals outlook

    Glencore said tough market conditions, especially for aluminium and nickel, were hurting the business even though it had previously said the trading division would meet earnings targets whatever happened to commodity prices.

    "Glencore's high exposure to copper, whose prices are at their lowest since 2009, is a weakness. Also, the lower projected earnings of the company's trading arm, which is supposed to help the firm buck the commodities cycle, highlight the limits of its business model in this low-price environment," said Sebastien Marlier, commodities analyst at the Economist Intelligence Unit.

    "It's hard to predict what China is doing, as an industry we should not be increasing production in anticipation of China demand," Chief Executive Ivan Glasenberg told Reuters.

    "We will pull back our own production if necessary. Keep it in the ground, you can dig it out anytime."

    Formerly just a commodities trader, Glencore merged with mining company Xstrata in 2013. The marketing business was seen as a plus in diversifying earnings of the combined company as its success was not so closely tied to commodity prices.

    Glencore said first-half adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 29 percent to $4.6 billion, while earnings from its marketing division fell 27 percent to $1.2 billion.

    Chief Financial Officer Steve Kalmin said the company's cash flow was "comfortable" to service its debt, return cash to shareholders and support growth in copper and zinc production, where it was pursuing new opportunities.

    The price of copper, Glencore's largest earner, is at six-year lows weighed down by a slowdown in China, one of the world's biggest consumers of metals and other raw materials.

    "We are still looking for growth in both copper and zinc production in the second half of 2015 and then continuing in 2016," Kalmin told Reuters. "Those in particular are the two commodities that we see going forward fundamentally looking in much better shape than other commodities."

    Analysts had expected deeper cost cuts by Glencore to ease the strain on its debt levels and protect its credit rating.

    Coal prices, another major commodity for Glencore, also show no sign of recovering due to a supply glut.
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    Iluka H1 profit rises on higher revenues

    Iluka H1 profit rises on higher revenues 

    Higher revenues have lifted mineral sands miner Iluka’s after-tax net profit for the six months ended June 30 to A$20.4-million, compared with A$11.7-million in the prior comparable period. The company said the increased earnings reflected a lower exchange rate combined with lower depreciation charges. 

    Revenue from mineral sand sales for the first half of the year increased to A$349.6-million, compared with A$343.2-million in the prior comparable period, despite sales volumes having decreased by 0.4% year-on-year to 275 900 t. 

    Zircon sales increased by 4.9% year-on-year to 153 400 t, while combined rutile and synthetic rutile sales volumes reached 122 500 t, which was marginally lower than the 130 800 t reported in the first half of 2014. This reflected scheduling of high-grade titanium dioxide sales during the six months, as some customers rebalanced their supply chains in line with the ramp-up of Iluka’s synthetic rutile production, which restarted in April. 

    Iluka noted that the higher revenue achieved for its zircon, rutile and synthetic rutile products reflected an increased average realised Australian dollar per tonne, owing to a lower exchange rate, offsetting marginally lower volumes and weighted average received US dollar sales prices. Meanwhile, cash costs declined by 12.6% to A$175.5-million in the interim period, compared with the cash costs of A$200.7-million reported in the previous corresponding period, owing to the lower production of by-products and ilmenite concentrate. 

    Unit cash costs of production reached A$616/t, for zircon, rutile and synthetic rutile, excluding the by-product costs, which compared with the A$719/t reported in the first half of 2014. The lower unit cash costs also reflected higher production and the completion of mining at the Woomack, Rownack and Pirro operations, in the Murray basin. 

    Iluka MD David Robb said “Iluka’s balance sheet remains strong, both absolutely and relative to many players in the resources sector, with low net debt and significant funding headroom. This enables Iluka to continue to invest in its business and to consider external investments in a countercyclical manner, where financial merit and strategic rationale are evident,”
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    Nevada Copper’s Pumpkin Hollow clears last regulatory hurdle

    Nevada Copper’s Pumpkin Hollow clears last regulatory hurdle 

    TSX-listed Nevada Copper is now fully permitted to start construction and operate its $1.04-billion Pumpkin Hollow openpit and underground copper project, located in the province. The Vancouver-based project developer on Monday said that the appeal period for the outstanding revised reclamation permit expired on August 9. No appeals were filed, rendering this final permit effective as of August 14. 

    "Achievement of a fully permitted project is an enormous achievement and, for Pumpkin Hollow, is the culmination of years of effort by many people. "Pumpkin Hollow has a long life and low operating cost, confirmed by our recently-completed integrated feasibility study with additional upside as demonstrated by recent drilling results,” president and CEO Giulio Bonifacio commented. 

    The Pumpkin Hollow copper project had proven and probable mineral reserves, including openpit and underground, of 572-million tons of ore grading 0.47% copper equivalent, containing 5.05-billion pounds of copper, 761 000 oz of gold and 27.6-million ounces of silver. 

    The feasibility study on the project had confirmed the technical and financial viability of building and operating a 70 000 t/d copper mining and processing operation comprising a single large concentrator, with mill feed from openpit and underground operations. 

    The project development proposed a 63 500 t/d openpit mine and 6 500 t/d underground mine feeding a single 70 000 t/d concentrator, generating substantial yearly cash flow over the life of mine. The project had a net present value, at a 5% discount rate, of $1.1-billion, an after-tax internal rate of return of 15.6%, with 4.7-year payback. 

    “What makes Pumpkin Hollow truly unique, however, is that it is now a fully permitted copper project located in Nevada – one of the best mining jurisdictions in the world. This makes Pumpkin Hollow an attractive and scarce copper asset,” Bonifacio said. Nevada Copper said that it continued to advance financing options and expected these developments to further enhance financing opportunities.

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    Tiger CEO walks away

    Tiger CEO walks away 

    Copper cathode producer Tiger Resources has announced the resignation of its CEO Brad Marwood. Company director Michael Griffiths has been appointed interim CEO while the company seeks a successor to Marwood. 

    Griffiths has been a director of Tiger since the end of 2012 and has over 30 years experience in the Australian and African minerals and energy sectors. Marwood will serve as an adviser to Tiger for an interim period, to assist with the transition of the new leadership team. 

    Tiger is aiming to produce 25 000 t of copper cathode at its Kipoi project, in the Democratic Republic of Congo, in the current financial year. 

    A recent debottlenecking study of the solvent extraction and electrowinning plant revealed that copper production could be increased from the 25 000 t/y nameplate capacity to 32 500 t/y at a capital investment of $25-million.
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    Vale ordered to halt production at giant Amazon nickel mine

    Vale ordered to halt production at giant Amazon nickel mine

    A Brazilian federal court on Friday ordered Vale, the world's number one nickel and iron ore producer, to halt activity at its Onça Puma nickel mine in northwestern Brazil.

    The judge said operations at the mine which produces nearly 9% of Vale's total production of the steelmaking raw material should cease until the Rio de Janeiro-based company sorts out compensation to indigenous communities in the region, reports Reuters.

    The court also ordered the company to deposit 1 million reais ($287,000) for each indigenous village in the area in Para state until a new payment program for the local communities can be implemented.

    They are being asked by indigenous peoples to finance services that are properly the responsibility of Brazil's federal and state governments

    Protestors have been disrupting operations by blocking Vale's railway line from its expansive Carajas iron ore and nickel mining complex in the state.

    Vale has said in the past that "despite working closely with native groups and supporting cultural and social projects, they are being asked by indigenous peoples to finance services that are properly the responsibility of Brazil's federal and state governments, not Vale."

    Vale overtook Russia's Norilsk Nickel last year to become the world's largest nickel producer in terms of output with mines in its home base, Canada, Indonesia, and New Caledonia producing some 290,000 tonnes a year.
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    Aluminum production in China drops

    Aluminum production in China drops

    Production of the metal used in everything from cars to window frames dropped about 1.3 percent in July to 2.72 million tons from 2.76 million tons a month earlier, National Bureau of Statistics data show. Output had surged to a record in June as low-cost smelters ramped up output, fueling a surge in exports.

    The decline in July will offer some relief to global smelters who have cut output as they’ve seen earnings suffer with global prices slumping to the lowest levels since 2009. While exports from China fell 20 percent in July, they have surged 28 percent to 2.87 million tons in the first seven months, the highest ever for the period.

    “Production fell as the pace of output cuts in high-cost capacity was faster than the increase in new production,” said Wang Chunhui, an analyst with SMM Information & Technology Co.

    Falling local demand and excess production are hurting China’s aluminum and steel industries, leaving exports as the only outlet. Overseas steel sales expanded 27 percent to 62.13 million tons in the first seven months, the highest ever for the period, according to data compiled by Bloomberg.

    New low-cost aluminum capacity in Xinjiang, Inner Mongolia and Shandong is boosting supply, while government subsidies keep high-cost plants operating, according to Goldman Sachs Group Inc. analysts including Max Layton and Jeff Currie.

    Price Slump

    Goldman Sachs cut its price forecasts by at least 21 percent from 2016 through 2018 and predicted gluts of about 2.5 million tons to 3 million tons from 2016 to 2019, the bank said in a report dated Aug. 10.

    Growth in Chinese demand was “very disappointing” in the first half, reflecting slowing credit, a rising real exchange rate and a weaker property market, the bank said.

    Aluminum prices on the London Metal Exchange have slumped 21 percent in the past year and touched the lowest in six years on Wednesday, while premiums in the U.S. have slid to a 43-month low, according to Harbor Intelligence.

    Century Aluminum Co., a U.S. producer, cited pressure from Chinese exports in announcing the permanent closure of an idled smelter. Shipments from China are a “real threat to orderly, competitive and strong markets,” Chief Executive Officer Michael Bless said in a conference call this month.
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    Steel, Iron Ore and Coal

    Guildford cancels Mongolian deal

    Guildford cancels Mongolian deal 

    ASX-listed junior Guildford Coal has abandoned its plans to acquire an 80% stake in a large thermal coal project and associated power station project in Mongolia. 

    The company said on Friday that following a due diligence process, Guildford had decided not to proceed with the transaction. Guildford in June signed a memorandum of understanding to acquire the 600 MW mine-mouth-coalfired Tsaidamnuur project, located 15 km from the Trans-Mongolian Railway line, which traverses Mongolia connecting Russia and China. 

    The project consisted of three mining licences, containing a large thermal coal deposit. With the decision not to proceed with the transaction, Guildford would now take action to recover a $2-million fully refundable deposit.
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    Global crude steel production in July dips by 3.8% YoY

    Global crude steel production in July dips by 3.8% YoY


    WorldSteel crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 133 million tonnes in July 2015, a -3.8% decrease compared to July 2014.
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    Steel exports from China to surge this year – Cliffs Natural Resources

    Steel exports from China to surge this year – Cliffs Natural Resources

    According to Cliffs Natural Resources, steel exports from China will surge to more than 100 million tonnes this year as local mills benefit from a rising tide of cheap iron ore to produce more than Asia’s top economy needs.

    Mr Lourenco Goncalves, chief executive officer of the largest US iron ore producer, said in a phone interview from the company’s headquarters in Cleveland, Ohio “It’s like a bad virus. Australia continues to give iron ore to China almost for free, allowing them to produce more than they need.”

    He said “What China is exporting alone is bigger than the second biggest producer of steel in the world: it is crazy.”

    He added “With the massive sales of iron ore to China, enabling China to produce a lot more than China actually needs for consumption, there’s a glut of exports.”

    However, Mr Wang Yingsheng, deputy secretary-general of the China Iron & Steel Association, said in an interview “Everyone is complaining about Chinese steel exports. While the volume of shipments shows the good appetite from foreign clients, it also indicates overcapacity and weakening demand in China.”

    Exports from China are forecast to expand 21 per cent to 111 million tonnes in 2015, according to a projection from Colin Hamilton, head of commodities research at Macquarie Group. That compares with 53 million tonnes in 2013.
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    Glencore suspends coal supply agreement with S.Africa's Eskom

    Glencore suspends coal supply agreement with S.Africa's Eskom

    Glencore's South African coal mining subsidiary suspended its supply agreement with national power utility Eskom on Thursday while the mining unit undergoes a financial rescue programme, its administrators said.

    Glencore has said that Optimum Coal Mine, which produces 10 million tonnes a year, is under financial strain because it was selling coal to Eskom for less than the cost of production.

    South Africa's business rescue law, similar to Chapter 11 bankruptcy protection proceedings in the United States, allows a financially distressed company to temporarily delay creditors' claims against it or its assets.

    Optimum has offered to temporarily supply coal to Eskom at the cost of production, higher than what Eskom currently pays, while a new deal is negotiated, V-Squared Business Rescue Services, the business rescue practitioner said in a statement.

    The Glencore unit sells half its output to Eskom's 2,000-megawatt Hendrina power station under a supply contract which is due to run until 2018. Eskom has also complained about the low quality of coal from Optimum, a claim disputed by Glencore.

    Eskom spokesman Khulu Phasiwe said the utility was under its own financial strain and could only renegotiate the current contract when it ends in 2018.

    "At this stage we cannot make any alterations to the contract, we have communicated to Glencore that we may renegotiate in 2018," he said.

    Phasiwe said the company would consult its lawyers on Optimum's decision to suspend coal supplies.

    Hendrina power station has coal stockpiles for up to 40 days and will come up with a plan for in case the issue is not resolved within that time, he said.

    Global coal prices have fallen by around 10 percent this year, partly due to oversupply, extending losses seen since 2011. This is of particular concern for South Africa as the production of coal contributes more than any other commodity to its gross domestic product.

    Eskom is renegotiating most of its coal contracts and borrowing money to ease financial pressures as it struggles to provide enough power to keep the lights on in the Africa's most advanced economy.
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    China key steel mills daily output up 5.45pct in early-Aug

    China key steel mills daily output up 5.45pct in early-Aug

    Daily crude steel output of China's key steel mills witnessed an increase in early August after a fourth ten-day straight decrease, according to the latest data from the China Iron and Steel Association (CISA).

    China’s key steel producers produced 1.69 million tonnes of crude steel on average each day in August 1-10, up 5.45% from ten days ago.

    The CISA didn’t give an estimate on the nation’s daily output in early August.

    Stocks in key steel mills stood at 15.51 million tonnes by August 10, rising 2.58% from July 31 but down 5.31% from the month before, data showed.

    Additionally, key steel mills’ daily output of pig iron stood at 1.67 million tonnes during the same period, up 3.91% from end-July.

    Over August 1-10, five out of six major steel products in domestic market saw a rebound in prices, with rebar price averaging 2,199.7 yuan/t, rising 7.5% from ten days ago, showed data from the National Bureau of Statistics.

    From August 3 to 9, prices of domestic steel products saw a week-on-week rise of 1.3%, with rebar price up 2% from a week ago, showed data from the Ministry of Commerce.

    China’s steel prices may see upward strength in August due to tight supply amid continuous output cut of steel mills impacted by the upcoming military parade in capital Beijing.
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    Coal prices hit 12-year low – npower’s daily market report.

    Coal prices hit 12-year low – npower’s daily market report.

    The price of coal is the lowest it has been in 12 years, according to npower’s daily market report.

    It is currently trading at $53.2 a tonne (£33/tonne).

    The weakness is due to an increase in supply and a reduction in demand from China and the US, the report claims.

    The UK gas system is well supplied again this morning due to high LNG flows. The linepack is currently forecast to close 6mcm long.

    Sarah Astley from npower’s optimisation desk said: “Langeled flows remain subdued at 18mcm with the unplanned outage at Troll gas field continuing however this is currently expected to be rectified by tomorrow.”

    LNG flows from South Hook remain high at 60mcm with four tankers expected to dock at the port next week.
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    Chinese coal imports remain low during H1 2015

    Chinese coal imports remain low during H1 2015

    Image Source: WiredIt is reported that Chinese coal imports remained weak during H1 2015, when China imported 38% less coal (including lignite and anthracite) compared to H1 2014. Just under 100 million t of coal was imported.

    As such, India is expected to supersede China as the world’s largest importer of coal.

    Approximately 70% of China’s energy is generated by coal, but recently China has worked to implement more renewable energy sources, such as hydropower. Consequently, there has been a decline in the demand for coal in power generation.

    Mr Peter Sand, Chief Shipping Analyst at BIMCO, said that “Currently, overall dry bulk demand is the weakest since 2009 and freight rates gives ship owners few options but to endure. Diminishing volumes as well as dwindling sailing distances for total Chinese coal imports is a drag on the market.”

    China’s production of crude steel decreased to 410 million t during 1H15, 1.3% lower than 2014, and metallurgical coal imports decreased by 30% during 1H15 to 21.6 million t.

    Australian producers supply the majority of Chinese imports, 50%, but have recently faced competition from Mongolian exporters: metallurgical coal exports from Australia has decreased by 28% during 1H15, while the Mongolian exports decreased by 17%.

    Australia is one of the larger suppliers of thermal coal to China. Alongside Indonesia it accounts for 87% of thermal coal imports. Imports from South Africa, however, have ceased.

    Sands added “The eventual implementation of the free trade agreement between China and Australia will eliminate the tariffs currently imposed on Chinese coal imports. An increased coal trade between China and Australia will benefit seaborne trade as current alternative sources are closer to China and thus involve less transportation by sea. On the other hand, as it becomes more favourable for China to import coal from Australia, the chances of seeing beneficial longer-haul trades from, for instance South Africa, unfortunately become less likely.”

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    Junior Iron ore miners take large impairments

    Junior Iron ore miners take large impairments


    The 40% fall in iron ore prices pushed Australian iron ore miner and consumables group Arrium to an underlying net loss after tax of $A7M for the year to June 2015, down from a $296M NPAT a year earlier. Statutory NLAT after $1.7B in asset impairments was $1.9B.
    MD-CEO Andrew Roberts says restructuring of the mining business lowered targeted FY16 cash break-even price to about $US47/dmt for its Middleback Ranges exports.


    Falling iron ore prices and the seawall failure at its Koolan Island seawall failure sent junior producer Mount Gibson plunging to a net loss after tax of $A911.4M for the year to June 2015, from a $96.4M a year earlier, after non-cash impairments of $945.2M offset by a tax benefit of $99.9M.
    Following significant cost savings, CEO Jim Beyer predicts FY2016 sales of 4-4.5Mt at all-in cash costs of $50-54/wmt FOB.
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    Lack of takers for Goa iron-ore clogs all stockyards

    Lack of takers for Goa iron-ore clogs all stockyards 

    While iron-ore mining in the western Indian province of Goa is poised to resume within a month, there are no takers for the raw material, leading to the stockpiling of old inventories and a space crunch for new production. 

    According to a Goa government official, of the total 15-million tonnes of old iron-ore fines inventory occupying stockyards and ports, only six-million tonnes have been liquidated through seven rounds of auctions; however, in the absence of large-volume overseas buyers, local traders were refusing to transport the stocks. 

    The government was pushing hard to auction another one-million tonnes of iron-ore before mining operations resumed next month, as miners would continue to face an acute space crunch to stock new production, leading to sharp a rise at pithead dumps. Citing an example, the official said that, at the seventh round of auctions concluded last week, only 50 000 t was sold against an offer of one-million tonnes. 

    Under the circumstances, the government was facing an uphill task in liquidating nine-million tonnes of old stocks and the department of mines could do very little to make space for new stock, the official added. 

    The resumption of mining in Goa was expected to be led by Vedanta Resources, which was readying to get production from its Codli mines under way, starting around mid-October. Meanwhile, in a related development, a Supreme Court-appointed expert committee has recommended that the mining cap on production from all iron-ore mines in Goa be increased to 37-million tonnes a year, up from 20-million tonnes a year, which the Apex Court had earlier set as a precondition to lifting the three-year ban on mining in the province. 

    Simultaneously, to lure buyers and ensure higher volume offtake from mines, miners in Goa have sought a further reduction in export duty on low-grade iron-ore fines from the current rate of 10%.

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    Shanxi coal, steel and iron ore output falls in year to-date

    Shanxi coal, steel and iron ore output falls in year to-date

    North China’ leading coal-producing province of Shanxi produced 80.14 million tonnes of coal in July, down 1.6% on year and down 10.8% on month, said the provincial Bureau of Statistics on August 18.

    Over January-July, Shanxi produced 531.26 million tonnes of coal, down 4.3% year on year.

    Meanwhile, crude steel output of the province stood at 22.69 million tonnes during the same period, down 13.9% on year, with July output falling 19% from the previous year to 3 million tonnes.

    The output of iron ore and steel products was 21.4 million and 24.24 million tonnes between January and July, down 17% and 12% on year, with July output down 24.8% and 19.2% to 2.78 million and 3.33 million tonnes, respectively.

    Shanxi generated 21.5 GWh of power in July, down 8.8% on year. Total power output in the first seven months fell 8.2% from a year ago to 141.8 GWh.

    The province consumed 14.97 GWh of electricity in July, down 5% on year, with power consumption at industrial sector falling 6.4% to 11.79 GWh, data showed.

    Over January-July, Shanxi’s total power use stood at 100.37 GWh, down 5% on year, with power used in industrial sector down 7.1% to 78.19 GWh.
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    Patriot Coal Reaches Deal to Sell Remaining Mines

    Patriot Coal Reaches Deal to Sell Remaining Mines

    Patriot Coal Corp. hopes to unload more than $400 million in debt in a newly announced deal to sell its remaining West Virginia mines.

    Patriot said Monday that an affiliate of the Virginia Conservation Legacy Fund, an environmentally focused nonprofit, is in line to acquire two Patriot mining complexes in West Virginia as well as mining permits.

    As part of the deal, which Patriot hopes to subject to higher bids through a court-overseen auction process, VCLF would take responsibility for more than $400 million in liabilities—workers’ compensation, black lung and environmental—tied to the assets.

    VCLF Chief Executive Tom Clarke said mining operations would continue at Patriot’s Federal complex in northern West Virginia, where the organization will seek to reduce carbon emissions.

    The deal covers most of the assets that would remain if Patriot closes a previously announced sale of most of its mines to Blackhawk Mining LLC.

    “With VCLF and Blackhawk, Patriot has now entered into agreements to sell effectively the entirety of the Company, and we will move expeditiously to close both transactions so that we can successfully emerge from bankruptcy within the coming months,” Patriot President and Chief Executive Bob Bennett said Monday in a statement.

    Mr. Bennett added that both deals are expected to result in job offers for a “substantial majority” of Patriot’s current workforce.

    Patriot sought chapter 11 protection in May, less than two years after emerging from its prior court restructuring.

    Blackhawk is offering to issue up to $653.3 million in debt to fund its purchase of the bulk of Patriot’s mining assets, subject to competing bids at a Sept. 9 auction.

    Patriot is due in bankruptcy court Tuesday to ask the judge to let its creditors begin voting on its debt-payment plan, at the heart of which are the Blackhawk, and now the VCLF, sales.

    Creditors and other important stakeholders have asserted objections to a preliminary version of the plan, which they say is short on such crucial details as how much they will be paid. Others are concerned about the fate of the company’s environmental and employee obligations.

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    Supply-demand mismatch continues to dampen steel prices

    Supply-demand mismatch continues to dampen steel prices
    Steel prices in China continued to spiral downward in July as market supply far exceeded demand, latest data from the China Iron and Steel Association (CISA) revealed on Monday.

    The CISA China steel price index came in at 62.73 by the end of July, down 5.94 percent from a month earlier. The index marked a drop of 31.56 percent from a year ago, as no significant improvement in the supply-demand mismatch was seen, according to the association.

    It attributed the weak demand to the prolonged downward pressure on the broader economy, which posted a 7-percent growth in the first half of the year.

    As the government's pro-growth policies such as increased infrastructure spending gradually filter through, the CISA expects improving steel demand in the latter half of the year. But a substantial rebound in prices is unlikely due to high output and a severe export outlook, it added.

    Earlier statistics showed China's crude steel output totalled 476 million tonnes in the first seven months of 2015, down 1.8 percent year on year, while apparent consumption went down 5.2 percent to 420 million tonnes.

    The Chinese government has been at pains to digest production gluts from an investment boom spawned by generous subsidies in the past few years that saw producers in "favored" sectors, including steel, expand rapidly with little regard to real market demand.

    To gradually solve the problem, the government has banned new projects in steel, cement, electrolytic aluminum, flat glass and shipbuilding before 2017.

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    Indonesia's Aug HBA thermal coal price hit new low

    Indonesia's Aug HBA thermal coal price hit new low

    Indonesia's August thermal coal reference price, also known as Harga Batubara Acuan (HBA), was set at $59.14/t FOB, the lowest ever recorded since its inception in January 2009, said the Ministry of Energy and Mineral Resources.

    The August HBA price represents a drop of 0.03% from July, when it was set at $59.16/t -- an all-time low before the latest fall.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross as received assessment; 25% on Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash and 0.8% sulfur.

    The HBA for thermal coal is the basis for determining the prices of 73 Indonesian coal products and for calculating the royalties Indonesian producers have to pay for each metric ton of coal they sell locally or overseas.

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    Canada's Brookfield buying Australia freight firm Asciano for $6.6 bln

    Canada's Brookfield buying Australia freight firm Asciano for $6.6 bln

    Canada's Brookfield Asset Management is buying Australian port and rail freight firm Asciano for $6.6 billion to form a global logistics player, scooping up an asset that has been made cheaper by a slump in coal prices.

    The deal, the largest purchase of an Australian firm by an overseas entity since 2011 and the biggest acquisition by a Canadian firm in that country, underscores the huge international appetite for Australian infrastructure.

    It also casts a vote of confidence in the long-term future of the Australian coal industry, which is expected to defy global pressure on high polluting energy sources and grow exports in the years ahead. Coal exports are a key generator of earnings for haulage companies like Asciano.

    After slumping to 8-year lows, the coal price CO-FOBNWC-AU will probably stop falling soon and a lower Australian dollar means coal producers "are probably in better condition today than they were a year ago", Brookfield's infrastructure chief executive, Sam Pollock, told journalists in Sydney.

    Record low interest rates and a shrinking currency have added to the M&A appeal of the Australian logistics sector which is already struggling with lower valuations because of a downturn in commodity prices.

    Asciano's former parent company, Toll Holdings, agreed to a A$6.5 billion takeover by Japan Post Holdings earlier this year, while larger rail freight provider Aurizon Holdings has been seen as a potential takeover target.

    Adding to Asciano's appeal, the Sydney-listed company also on Tuesday beat analyst expectations with a 19 percent jump in underlying net profit for the year to end-June due to the benefits of a A$3 billion overhaul aimed at automating its equipment.

    Asciano's shares have traded below Brookfield's offer price since it first disclosed the Canadian company's approach on July 1. On Tuesday, the shares rose nearly 8 percent to an intra-day peak of A$8.75, their highest since 2008, but still below the offer price of A$9.15.

    "You've got currency risk and the risk of where those Brookfield shares will trade," said Morningstar analyst Ross MacMillan, noting that the cash and scrip offer is expected to close in December. The two companies and analysts did not see any significant regulatory hurdles for the deal.
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    China may see 170 GW coal-fired power capacity idling this year

    China may see 170 GW coal-fired power capacity idling this year

    China is likely to see some 96-170 GW of coal-fired power capacity being idled this year, as slowing power demand would make it unable to absorb growing capacity, which may exceed 960 GW by the end of the year.

    Based on an average cost of 3,800 yuan/KW ($593.8/KW), the idling capacity would cost some 360-650 billion yuan of investment, according to the China Electric Power News.

    China’s power consumption has dropped amid weak industrial demand as the Chinese economy slowed. Total power use increased only 1.3% from a year ago to 2,662.4 TWh over January-June, compared with a 4.3% growth from the same period last year.

    In contrast, China added 23.43 GW of coal-fired power installed capacity in the first half, up 55% from the year prior.

    The average utilization of power generating units across the country dropped 7.2% year on year to 1,936 hours in the six-month period, and is forecast to be 4,100 hours this year, down 4.34% from the actual figure in 2014.

    Analysts pointed out that too fast growth in thermal plants construction was the main reason for the drop in capacity utilization and wastes in renewables like wind, hydro and solar.
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    Australia's Aurizon hikes dividend payout, putting growth on hold

    Australia's Aurizon hikes dividend payout, putting growth on hold

    Aurizon Holdings, Australia's top coal hauler, raised its dividend payout well above expectations after reporting a 15 percent rise in profit on Monday, with growth opportunities limited by a slump in coal and iron ore markets.

    Aurizon's shares jumped as much as 4.3 percent on the announcement, and are up more than 13 percent this year.

    Underlying net profit rose to A$604 million ($445 million) for the year to June, in line with analysts' forecasts for a net profit of A$602 million, according to Thomson Reuters I/B/E/S, underpinned by cost cuts.

    The rail transport group raised its final dividend by 64 percent to 13.9 cents a share and decided to increase its payout ratio to between 70 and 100 percent as it won't be committing to any growth projects until late in calendar 2016.

    Aurizon invested in the West Pilbara Iron Ore project last year with China's Baosteel before iron ore prices plunged and is also looking to build a rail line for Indian group GVK's Alpha coal project, which is on hold.

    "The external environment will continue to provide challenges," Chief Executive Lance Hockridge said in a statement, adding that the company is still looking to expand in the long run.

    On the West Pilbara project, Aurizon said it has slashed cost estimates for the rail and port by A$1.5 billion, or about a third of initial estimates, and said costs could be cut further on the contracting and funding front.

    A final investment decision with Baosteel, South Korean steel giant POSCO and resources investor AMCI is due in late 2016.

    "This current year is going to be a relatively flat year," Hockridge told reporters, with coal volumes expected to be steady at around 210 million to 220 million tonnes.

    "We have subdued expectations, but nonetheless the momentum around the transformation in the business wll continue," he said, pointing to a new labour agreement which should give the company more flexibility in how it deploys workers.

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    China's steelmakers hit by glut in production, sinking prices

    China's steelmakers hit by glut in production, sinking prices
    The country's steelmakers reduced output last month, adding to signs of waning demand in the world's largest producer as companies grappled with overcapacity, sinking prices and slowing economic growth.

    Crude-steel output fell 4.6 percent to 65.84 million metric tons from June, data from the National Bureau of Statistics showed on Wednesday.

    Production in the first seven months was 476 million tons, 1.8 percent less than a year earlier. Demand for steel in Asia's largest economy is falling for the first time in a generation, spurring mills to ship record amounts of the alloy overseas as prices slump.

    The yuan sank on Wednesday for a second day after China devalued it, and the move may help steelmakers sell even more of their output abroad.

    Lower steel production will hurt demand for iron ore, though, which tumbled to the lowest since at least 2009 last month.

    The drop also showed "that downstream infrastructure and property had no recovery, therefore demand for steel remained weak".

    Major mills in China, including Hebei Iron & Steel Co and Baoshan Iron & Steel Co, are the linchpin of the global industry, accounting for about half of the supply.

    The country's production probably peaked in 2014, according to a forecast from the China Iron & Steel Association.

    Output of steel products fell 6.2 percent to 92.3 million tons in July from a month earlier, according to the bureau. In terms of daily production, output averaged 2.977 million tons last month from 3.281 million tons a month ago, it said.

    Steel reinforcement bars used in construction dropped to 2,102 yuan ($327) a ton last month, the lowest price since at least 2003, according to Beijing Antaike Information. It was at 2,322 yuan on Tuesday, 16 percent lower than at the start of this year.

    Mills around Beijing including those in Hebei province, the largest producing region, may face government-ordered curbs later this month and in September as policymakers seek to clean up the air for a parade and sports event.

    "Some of the output cuts might become permanent as the government and market work in tandem to squeeze out the least-efficient and loss-making capacity," said Li Yaozhong, head of commodities at Beijing Low Risk Asset Management Co.

    Iron ore with 62 percent content in Qingdao fell 0.3 percent to $56.22 a ton on Tuesday, according to Metal Bulletin Ltd. Prices, which bottomed at $44.59 on July 8, are 21 percent lower this year.

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    Yuan devaluation could trigger coal exports by world's biggest buyer

    Yuan devaluation could trigger coal exports by world's biggest buyer

    China's devaluation of the yuan may hit already oversupplied world commodity markets, as the surprise move increases the chances that the world's biggest coal importer will become a net exporter. That would not help global coal prices, already at their lowest for almost a decade.

    It would not be the first time such a reversal has occurred. China was one of the world's largest thermal coal exporters until around 2004 when rocketing demand at home helped drive the need for imports.

    China had been forecast to continue as a coal importer as the currencies of other major producers had been expected to weaken against the US dollar, while the yuan had been expected to remain firm, making Chinese exports less competitive.

    But faced with a run of weak economic data, China pushed down the value of the yuan this week, drawing accusations that it was unfairly supporting its exporters. The central bank says there is no basis for the yuan to fall further, but markets expect that could happen.

    Mr Stefan Ljubisavljevic, analyst at Macquarie Bank, said that "A week ago people would have said there was a slim chance China would become a net exporter... now people are reconsidering that and they think it could potentially happen on a five year view."

    Mr Ljubisavljevic said that "If you saw more protectionism of the domestic industry and devaluation continued, it could happen even sooner that China exports."

    Chinese coal imports have already fallen sharply in 2015, due to the government's concerns over the environmental impact of coal power generation and its desire to help financially distressed domestic coal producers.

    China's coal industry, which meets around 65 percent of the country's primary energy demand and employs nearly 6 million people, has been hit by a slowdown in sectors such as power generation, cement and steel, as well as a campaign to cut smog.
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    Shenhua among six parties potentially racing for Rio's coal business

    Shenhua among six parties potentially racing for Rio's coal business

    China's coal giant Shenhua Group is among six parties assessing bids for Rio Tinto's $4 billion thermal coal business in the Hunter Valley, Reuters reported, citing the Australian Financial Review.

    The interest from Shenhua, coal miner New Hope Corp Ltd and an unnamed specialist mining private equity firm broadens what had been expected to be a two-horse race between Glencore Plc and London-based X2 Resources.

    Shenhua has expressed interest just weeks after Australian Environment Minister Greg Hunt said he would review the government's approval for China Shenhua Energy Co's $1 billion Watermark thermal and soft coking coal project.

    Hunt announced the surprise review under pressure from agricultural groups, as the Watermark project is near prime farming land in New South Wales.

    The smaller New Hope, which has a market capitalisation of just $1.5 billion, is understood to be interested in only part of the Rio business, with industry players questioning whether they have the balance sheet to buy the full asset package.

    Industry sources suggested South32 may also take a look at the assets, but the company said on August 13 it was not interested.

    Rio last year rejected a takeover approach from smaller rival Glencore, snubbing a blockbuster deal that would have created a $160 billion mining and commodities trading giant.

    As Rio's coal business in the Hunter Valley is right next door to Glencore's coal business, Glencore is seen by many as the natural owner of the assets, but has only been prepared to pay a fraction of what Rio wants for the assets – which is thought to be about $US4 billion, with $US3 billion as a starting point.

    However, now that the competition is heating up, Glencore is considering a higher offer. A Rio-Glencore joint venture in coal would achieve about $500 million in annual savings or "synergies", Glencore told analysts last year.

    But London-based X2, which has $US5.6 billion in equity to spend on mining assets, could be the biggest snag for Glencore. Coal and copper are top of X2's wish-list, and sources said that X2 has been talking at least $US3 billion with Rio.

    Rio's coal boss left in February and the division was punted into the copper arm of the global giant.

    Rio's coal division in Australia has a book value of $US3.1 billion, which Rio would argue is already discounted because of the price malaise. That also includes two metallurgical coal mines in Queensland, which could be left out of any deal.
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